Hedging Option Greeks: Risk Management Tool for Portfolio of Futures & Options

7th National Conference on business Innovations, ISBN: 978-93-84562-05-2

8 Pages Posted: 12 Nov 2019

See all articles by Dikshita Wadhawan

Dikshita Wadhawan

Amity University

Harjit Singh

Amity University Uttar Pradesh, India - Amity School of Business

Date Written: October 15, 2015

Abstract

Options are financial derivatives which are used as risk management tools for hedging the portfolios. The options traders can play safely in the volatile markets with the help of knowledge of the Greeks associated with the options. This study is focused at providing the knowledge of the Greeks and their implementation as risk management tools so as to enhance gains or avoid losses. Delta, Vega and Theta of the options as well as the other position. Greeks are associated with any option strategy and they equally impact the portfolio. The knowledge of the impact of Greeks on different strategies will lead to determine how much risk and the potential reward is associated with the portfolio. The study will focus on getting instrument rated with options trading perspective, in order to make investor handle any strategy scenario and hedge the risk so as to gain good rewards. This will also guide the investor to determine the risk-reward ratio, prior to entry in the trade. Options trading can be taken to the next level with the help of understanding of Greeks and their Hedging techniques. This knowledge will enhance the existing knowledge in context to the options hedging and will lead to the benefits in trading if Delta-Gamma neutralised strategy or Delta-Vega neutralised strategy will be employed along with the best market movement suited option strategy.

Keywords: Financial Derivatives, Hedging, Risk Management, Option Greeks, Options Trading

JEL Classification: G23, G20, G0, E44

Suggested Citation

Wadhawan, Dikshita and Singh, Harjit, Hedging Option Greeks: Risk Management Tool for Portfolio of Futures & Options (October 15, 2015). 7th National Conference on business Innovations, ISBN: 978-93-84562-05-2. Available at SSRN: https://ssrn.com/abstract=3479421 or http://dx.doi.org/10.2139/ssrn.3479421

Dikshita Wadhawan (Contact Author)

Amity University ( email )

Noida
India

Harjit Singh

Amity University Uttar Pradesh, India - Amity School of Business ( email )

K-3 Block, Amity University Campus
Sector 125,
Noida, UT 201303
India

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