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Delta neutral
By Martin | October 20, 2011
An option portfolio delta-hedged such that it has no exposure to small moves in the price of the underlying.
In practice, since delta is altered by all but the very smallest changes in the price of the underlying,
by the volatility of that price, by the maturity of the option, by how close-to-the-money the option is and by interest rates,
the ratio of options to underlying must be constantly re-balanced to maintain delta neutrality.
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