Delta Hedging

Question 1

Long Call → Moves ITM: Where does delta move?
What hedge adjustment is needed?

Answer 1

Delta ↑ toward +1 → Sell shares to reduce long exposure.

Question 2

Long Call → Moves OTM: Where does delta move? What hedge adjustment is needed?

Answer 2

Delta ↓ toward 0 → Buy shares to increase long exposure.

Question 3

Short Call → Moves ITM: Where does delta move? What hedge adjustment is needed?

Answer 3

Delta ↓ toward -1 → Buy shares to offset short exposure.

Question 4

Short Call → Moves OTM: Where does delta move? What hedge adjustment is needed?

Answer 4

Delta ↑ toward 0 → Sell shares to reduce excess long exposure

Question 5

Long Put → Moves ITM: Where does delta move? What hedge adjustment is needed?

Answer 5

Delta ↓ toward -1 → Buy shares to offset short exposure.

Question 6

Long Put → Moves OTM: Where does delta move?
What hedge adjustment is needed?

Answer 6

Delta ↑ toward 0 → Sell shares to increase short exposure.

Question 7

Short Put → Moves ITM: Where does delta move? What hedge adjustment is needed?

Answer 7

Delta ↑ toward +1 → Sell shares to reduce long exposure.

Question 8

Short Put → Moves OTM: Where does delta move? What hedge adjustment is needed?

Answer 8

Delta ↓ toward 0 → Buy shares to restore long exposure.