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? Financial Exam Help Your portfolio value is hedged. Opposite position if you are using call option i.

If you go to the CFAI EOC questions 4 and 5, they deal with this. If you refer to the answer, it will give you a better understanding.

How can you use delta to determine how to hedge options? | Investopedia

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. Apparently I copied and pasted the line I wrote about calls, then forgot to change positive to negative. AnalystForum is an online community designed exclusively for CFA candidates and charterholders to discuss the Chartered Financial Analyst program. Skip to main content. Be prepared with Kaplan Schweser.

CFA More in CFA CFA Test Prep CFA Events CFA Links About the CFA Program. CFA Forums CFA General Discussion CFA Level I Forum CFA Level II Forum CFA Level III Forum CFA Hook Up.

Delta hedge with put options? | AnalystForum

More in CAIA CAIA Test Prep CAIA Events CAIA Links About the CAIA Program. More in FRM FRM Test Prep FRM Events FRM Links About the FRM Program.

Test Prep Sections CFA Test Prep CAIA Test Prep FRM Test Prep. Home Forums CFA Forums CFA Level II Forum Delta hedge with put options? Tweet Widget Facebook Like Google Plus One Linkedin Share Button. CFA Charterholder AF Points.

Cross the Finish Line with a Comprehensive Final Review. Smagician May 6th, 6: Boardmember, Forum Editor CFA Charterholder 18, AF Points.

Think of it like buying portfolio insurance: Best to buy far out-of-the-money puts.

Simplify the complicated side; don't complify the simplicated side. Could we go with an example? Smagician May 7th, 3: CFA Level III Candidate 25 AF Points. Thumb rule for delta hedging: Same positions if you are using put i. Smagician May 8th, 1: CFA Level III Candidate 1 AF Points. Put options have negative option delta. Smagician Apr 10th, 8: This Post Is Filed Under: Economic Analysis, Active Management, and Trading.

Fitch Learning - Toronto - Top 10 Common Pitfalls to Avoid - FREE EVENT. About AnalystForum AnalystForum is an online community designed exclusively for CFA candidates and charterholders to discuss the Chartered Financial Analyst program.