The options required for a hedge = Number of shares / Delta I’ve seen some question where they ask for the number of shares required for the hedge. I think sometimes the number come out to a negative. How is that possible? Is that for a put?
The delta wasn’t negative btw.
That means it was a call. If you are long a call, you must be short the underling (negative).
can you paste the question?
question would help!
Sorry I can’t. I would have to look for it. It would take too much time. There’s some question on the schweser testbank. I believe it’s the one with the long vignette.
well…as long as you understand the relatiionship you should be able to figure out the answer…if you are long stock and trying to hedge the position it is short a call or long a put…and if you are short the stock and trying to hedge the position it is long call or short a put
Delta is negative means that the position of the underlying asset is the same as to the position of the hedged derivatives since their price moves in different direcion. For example, the delta of call option is positive, so you have to long call and short stock for a hedge. The delta of a put is negative, so you have to long put and long stock for a hedge.