Option Greeks and Hedging Strategies

Hedging options positions is not particularly easy and in several cases it is more of an art than science. This is because there are multiple ways to hedge, multiple factors to monitor at the same time and each market participant has different hedging requirements (think about a specific company that needs to defend a certain price level while another one needs to hedge multiple exposure to physical orders whose deliveries span across multiple tenors). The perfect technique does not exist but there are multiple approaches to hedging and in the current research we will go through the most commonly adopted ones: covered positions, stop-loss, delta hedging, delta-gamma hedging, hedging at regular intervals and hedging using delta bands. This research was published on the Medium platform a few years ago but it is still valid today. Please click here to read the rest of the research.

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