In Schweser I’ve only seen the delta-hedge by shorting (shares to hedge/call option delta) call options. How would this work with put options? Given that the put option delta will be negative, I wonder how would we interpret the resulting number of options to hedge the stock (in this case, long puts no?)

Let’s say that you have 10,000 shares of Company X stock, selling at $20/share. A $15 strike put has a delta of −0.25. So you buy 10,000 / 0.25 = 40,000 puts. If the stock price drops by $1/share ($10,000 total for the portfolio), the value of the puts increases by 0.25($1) = $0.25, so the total value of the puts increases by 40,000($0.25) = $10,000. Your portfolio value is hedged.

Ok issue solved, my quesion came from the fact that put option delta is negative and Schweser did not specifiy to use absolute values. Even though it seems obvious, just wanted to confirm.

You can think of it this way: number of shares / delta:

A positive number means that you sell a positive number of options (and they’ll be calls, because only calls have a positive delta)

A negative number means that you sell a negative number of options, which is the same as buying a _ positive _ number of options (and they’ll be puts, because only puts have a positive _ negative _ delta)

Hi s2000 can u show an example where you sell put and sell shares? The max loss that u face when you sell a put is your premium right. So how does the delta hedge net 0 in this case?