BackQuant Glossary
Dealer Hedging
The act of buying or selling the underlying to offset directional exposure created by an options book. Dealers stay delta-neutral by trading spot or perpetuals as price moves. Dealer hedging is the mechanical force behind gamma exposure effects, pinning, and OpEx flows.
Related terms
Delta
An option Greek measuring how much the option price changes per one-dollar move in the underlying. A call with delta 0.5 gains roughly fifty cents per one-dollar rise in spot. Delta also approximates the probability the option finishes in-the-money.
Delta-Neutral
A position with offsetting deltas summing to zero, so small spot moves do not change the position value. Market makers run delta-neutral books by hedging continuously. Delta-neutral strategies isolate exposure to volatility, time decay, or higher-order Greeks.
Gamma
A second-order Greek measuring how much delta changes per one-dollar move in the underlying. Gamma is highest for at-the-money options near expiry. Long option positions are always long gamma; short options are short gamma. Gamma is the input to gamma exposure.
OpEx
Options expiry. The recurring event when options settle, almost always referring to the Friday 08:00 UTC settlement on Deribit in crypto. The largest scheduled liquidity event of the week. Quarterly OpEx (last Friday of March, June, September, December) is the largest of the year.
Spot
The current cash market price of an asset for immediate delivery. Spot is the underlying reference for derivatives pricing. Crypto spot trades 24/7 across hundreds of venues, with index prices aggregating across the deepest ones.
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