By roma, 14 August, 2020

Professional option traders very often use terms such as flat and steep volatility skew in conversations. There is no clearly defined rule for calculating the volatility skew, as it will depend on the expiry date and moneyness of options that trader wants to use to determine the skew (Read Rules for Trading Volatility skew).

By roma, 14 August, 2020

Delta hedging is one of the ways to reduce the risk of an option position, aimed at reducing the sensitivity of the derivatives portfolio to small fluctuations in the price of the underlying asset. Frequent delta hedging is a typical task for traders who specialize in options with expiry dates of up to one month.

By roma, 14 August, 2020

Trader can buy or sell the underlying asset in order to hedge delta of an option position. Now we will analyze the principle of delta hedging in more detail and show an example of gamma hedging.