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A little math help here


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Vancouver
 
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What is the calculation for a delta neutral hedge against being long in a stock?

ie 5000 shares of AAPL with a put delta of -.15

if delta was -1 then it would require 50 put contracts
50*100=5000 or (5000 / (-1*100) = -50)

so then 5000 / (-.15*100) = -333 contracts

It would require 333 put contracts to give a delta neutral hedge against 5000 AAPL shares with a delta of -.15?


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 Bookworm 
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The math is correct but only for that underlying price, volatility and time. Delta changes as the underlying moves, as time passes and as implied volatility changes.


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Last Updated on December 12, 2015


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