jazzz

Hi all....

I am providing my hedge strategy for options. I hope you would find it interesting.

The primary risk in both stock and futures positions is what is option traders call "delta" risk, the loss when the price of the stock or future moves in the wrong direction. Long positions have a positive delta, while short positions have a negative delta.

That risk can be hedged by taking an options position with the opposite delta. Deltas for options are

positive for long calls
negative for long puts
negative for short calls
positive for short puts

So, if you have a long stock (or futures) position you have a positive delta. To hedge that risk you can take an options position with a negative delta by buying puts and/or writing (shorting) calls.

Similarly, if you have a short stock (or futures) position you have a negative delta. To hedge that risk you can take an options position with a positive delta by buying calls and/or writing (shorting) puts.

Looking fwd for you comments.
Cheers