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Soft bank - buy call options - push FANG company go up -
Delta squeeze from broker - short squeeze from short seller
Real World Example of Delta Hedging
Let's assume a trader wants to maintain a delta neutral position for investment in the stock of General Electric (GE). The investor owns—or is long one put option on GE. One option equals 100 shares of GE's stock.
The stock declines considerably, and the trader has a profit on the put option. However, recent events have pushed the stock's price higher. However, the trader sees this rise as a short-term event and expects the stock to fall again eventually. As a result, a delta hedge is put in place to help protect the gains in the put option.
GE's stock has a delta of -0.75, which is usually referred to as -75. The investor establishes a delta neutral position by purchasing 75 shares of the underlying stock. At $10 per share, the investors buy 75 shares of GE at the cost of $7,500 in total. Once the stock's recent rise has ended or events have changed in favor of the trader's put option position, the trader can remove the delta hedge.
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