How is hedging need decreased by a gamma-neutral strategy
How is hedging requirement decreased by a gamma-neutral strategy?
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Because costs can be large and because one wants to reduce exposure to model error it is natural to try to minimize the need to rebalance the portfolio more frequently. Because gamma is a measure of sensitivity of the hedge ratio Δ (delta) to the movement in the underlying, the hedging need can be decreased by a gamma-neutral strategy. It means buying or selling more options, not only the underlying.
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