Neutral Hedge Ratio

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Neutral Hedge Ratio

The change in the price of a call for every one unit of change in the price of the underlying asset. The neutral hedge ratio varies according to length of time until the expiration date and whether or not the call is in-the-money.

neutral hedge ratio

The number of options contracts necessary to offset exactly any changes in the price of a contract's underlying asset. This ratio varies depending on the time to expiration and the difference between the asset's market price and the option's strike price. It approaches one when the option is near maturity and is in-the-money.

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