Question

If you sold 100 shares of a call option on Tesla shares that had a 50...

If you sold 100 shares of a call option on Tesla shares that had a 50 delta, what would be your first delta hedging transcaction?

A.

Pray the price falls
B.

Buy a put for the same date
C.

Sell 50 shares of Tesla Stock
D.

Buy 50 shares of Tesla Stock
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Answer #1

Answer: Option "D" is correct that says, "Buy 50 shares of Tesla Stock".

Delta Hedging strategy- It is an options strategy that is used to reduce the risk, associated with the price movements in the underlying asset. Delta hedging tries to reduce the extent of the move in option's price relative to the underlying's price.

It can involve one buying and one selling. So if a trader sells 100 shares of Call options with the delta of 50, he can buy 50 shares of the same underlying.

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