Hedging a Long Position

Fixed Hedge

Delta Hedge

Delta Factor - At-The-Money-Put

Change in the Delta Factor

Fixed Hedge Formula

Hedging Options

Comparing Delta Hedging to Fixed Hedging

Fixed Hedge

Delta Hedge

Fixed Hedge

Delta Hedge

The Final table

Whereas fixed hedging limits the loss potential of the hedge to the premium, the aim of delta hedging is to establish a hedge, which at every moment and price of the underlying generates a **loss as close to zero as possible**.
However, delta hedging is based on the assumption that the delta factor behaves as expected, which is not always the case.