Options Portfolio Hedging: Hedging the Initial Exposure
Interactive

Options Portfolio Hedging: Hedging the Initial Exposure

Intuition Publishing
Updated Sep 24, 2020

Before attempting to hedge an options portfolio, a few issues must be considered. We examine the shortcomings of many theoretical option formulas when applied to the real world, discuss dynamic hedging and how the changing delta of an option affects a hedge, and finally evaluate the risks that face an options trader when hedging the initial exposure.