3 ms·
if you delta hedge (ie taking opposing positions in the underlying and the derivative, ie selling a call and buying the stock and then constantly readjusting yo
by aaavl2821 9y ago
if you delta hedge (ie taking opposing positions in the underlying and the derivative, ie selling a call and buying the stock and then constantly readjusting your position), you can protect yourself against small / normal changes in price of the underlying, but if there are big jumps in the underlying, and acceleration of delta (ie gamma) you can lose a lot.