Delta Hedging

Delta hedging is a strategy used by traders to manage the risk associated with options or other derivatives. It involves adjusting the positions in the underlying asset (like stocks) to offset the fluctuations in the derivative's value. The "delta" measures how much the derivative’s price is expected to change with a small move in the underlying asset. By continuously rebalancing the holdings so that the total position remains neutral (delta close to zero), traders can protect themselves from adverse price movements and maintain a more stable exposure, effectively minimizing potential losses from market volatility.