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Strategies & Market Trends : Steve's Channelling Thread
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To: GTC Trader who wrote (22792)8/3/2001 6:41:39 AM
From: Crimson Ghost  Read Replies (1) of 30051
 
I am no expert but a delta hedge can occur when firms who have sold call options buy the underlying security or commodity when the price rises unexpectedly. They do this to limit potential losses. This, of course, tends to leverage the move up. Delta hedging can also accelerate downside moves if dealers have sold large numbers of put options and the price begins to go against them.

To the extent that a move is exaggerated by delta hedging, the snapback after the move peters out tends to be that much greater. So perhaps this helps explain why futures are down sharply this morning despite the chart "breakout."
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