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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Delta hedge
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!
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.)