• Delta hedging is an options strategy that aims to be directional neutral by establishing compensating long and short positions in the same underlying asset.

  • By reducing directional risk, delta hedging can isolate changes in volatility for the options trader.
  • One of the disadvantages of delta hedging is the need for constant monitoring and adjustment of the involved positions. It may also incur trading costs as delta hedging is added and removed as the underlying price changes.