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A little math help here
Started:December 11th, 2015 (09:05 AM) by brags Views / Replies:235 / 2
Last Reply:December 12th, 2015 (12:08 PM) Attachments:0

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A little math help here

Old December 11th, 2015, 09:05 AM   #1 (permalink)
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A little math help here

What is the calculation for a delta neutral hedge against being long in a stock?

ie 5000 shares of AAPL with a put delta of -.15

if delta was -1 then it would require 50 put contracts
50*100=5000 or (5000 / (-1*100) = -50)

so then 5000 / (-.15*100) = -333 contracts

It would require 333 put contracts to give a delta neutral hedge against 5000 AAPL shares with a delta of -.15?

Last edited by brags; December 11th, 2015 at 09:22 AM.
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Old December 11th, 2015, 09:05 AM   #2 (permalink)
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Old December 12th, 2015, 12:08 PM   #3 (permalink)
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The math is correct but only for that underlying price, volatility and time. Delta changes as the underlying moves, as time passes and as implied volatility changes.

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