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Delta Hedging an Underwater Short Straddle

From Theory To Practice

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Last week, Kai and I laid out the basic idea behind delta hedging. To continue building on the theory of delta hedging with a specific example of how it might be implemented, we take a look at a Short Straddle that has moved against us. In this case, there are a handful of different moves we could make, and Kai joins us again to help us work our way through a couple of them.

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