Delta hedge

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October 9, 2020 at 4:56 pm #587842
Noah098
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Sir when we are doing delta hedge using the formula no.of option calls to sell= no.of shares held/N(d1) and if delta changes continuously either due to high gamma or frequent changes in the spot price of the underlying then, generally/strictly what is changed? Physical deliveries of shares owned are added or subtracted or that remains untouched and no.of calls to sell changes?
Many thanks!
October 10, 2020 at 12:17 pm #588520
John Moffat
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As far as the purchaser of the options is concerned, it is the number of options what would have to change.
(However, as I do explain in my lectures, in practice it is the writer of the options who will use delta hedges and they will have to change the number of shares.)
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