Delta Hedging Explained
Delta hedging explained. Learn how this risk management technique works and its impact on options markets and stock prices.
Frequently asked questions
Do retail traders need to delta hedge?
Most retail traders don't actively delta hedge. It's primarily a market maker strategy. However, understanding hedging helps you anticipate market movements and make better trading decisions.
What is gamma exposure (GEX)?
GEX measures the total gamma exposure of market makers. Positive GEX means dealers are long gamma and their hedging will dampen moves. Negative GEX means dealers are short gamma and hedging will amplify moves.
Why does max pain work?
Max pain (the strike where option holders lose most) often attracts price because of hedging dynamics. As price approaches high OI strikes, dealer hedging can push price toward or pin it near those levels.