How would you delta hedge an 'at-the-money' long call option?
A) Go short of the underlying commodity equal to 50% of the size of the option contract
B) Go long of the underlying commodity equal to 50% of the size of the option contract
C) Go long of the underlying commodity equal to the full size of the option contract
D) Go short of the underlying commodity equal to the full size of the option contract

Question

Quizplus · Accepted Answer

Delta hedging involves taking a position in the underlying asset that offsets the delta of the option. An 'at-the-money' call option typically has a delta of 0.5, so you would short 50% of the underlying to hedge.

How Would You Delta Hedge an 'At-The-Money' Long Call Option