long stock, and short call aim is that portifolio does not lose value when price of stock changes the hedge works for very small changes in stock value large stock value change will leave portifolio un hedged hence need to rebalancing always it costly Gamma rate of change in delta as a result of change in stock can measure how poorly a delta hedged portifolio will perform if not rebalanced both call and put options are at have positive gammas high when option is at the money there fore need frequent rebalancing, expensive lowest with deep in or out of the money options less need for frequent rebalancing less costly
Delta Call: it increases from 0 to 1 Delta Put: increases from -1 to 0
gamma highest at the $ with shortesr time to experation