Case & Hedging Examples. Delta – Neutral. Consider our strategy of a long Straddle: A long Put and a long Call, both at the same exercise price. What we are interested in is the Stock price movement, either way, and with symmetric returns. Case: Pine Street Capital.
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(10*100*.5519) + (10*100* -0.4481) = +103.72 BULLISH!
0.4481 / 0.5519 = 0.812
which means we will need .812 calls to each put (or 8 calls and 10 puts).
Note: Position Delta =
(8*100*.5519) + (10*100* -0.4481) = -6.65 Roughly Neutral