#### nikogeorgiev

##### Member

This is supposed to be an easy one but I am struggling with one Schweser question relating to delta hedging.

Suppose that a call option on Stock Y with a strike price of $50 trades at $3 and that the delta on this option is equal to 0.5. Derivatives trader Ralph currently owns 10,000 shares of stock Y and delta hedges his position with 200 call option contracts.

After the hedge is initiated, the price of Stock Y increases which increases the delta of the call option to 0.8. In order to main his delta hedge, Ralph should buy/sell how many shares?

Kind regards

N

I am lost here, why is he hedging with only 200 contracts given that the delta is 0.5? And from their the question doesn't quite make sense to me. What am I missing here?