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In options trading, “delta” represents volatility. It is one of a set of variables, collectively known as “the Greeks, that traders use to assess the risk of a derivative.
A related term, delta hedging, is the process of setting or keeping a portfolio as close to delta-neutral as possible. In practice, maintaining a zero delta is very complex because there are risks associated with re-hedging on large movements in the underlying stock's price, and research indicates portfolios tend to have lower cash flows if re ...
As a result, under normal market conditions, the arbitrageur expects the combined position to be insensitive to small fluctuations in the price of the underlying stock. However, maintaining a market-neutral position may require rebalancing transactions, a process called dynamic delta hedging. This rebalancing adds to the return of convertible ...
Over the holding period, the trader will realize a profit on the trade if the underlying's realized volatility is closer to his forecast than it is to the market's forecast (i.e. the implied volatility). The profit is extracted from the trade through the continuous re-hedging required to keep the portfolio delta-neutral.
It’s currently trading at $129.94 — 44% lower than its peak in early-2022. ... and Bank of America analysts upgraded the stock to Buy from Neutral, with both notes citing the company's focus ...
Market-neutral trading is a way to combine long positions with short ones. Rather than place your bets on upward or downward trends, this strategy takes advantage of volatility while mitigating risk.