BackQuant Glossary
Hedge
A position taken to offset risk in another position. Long spot can be hedged by buying puts. A short call book is hedged by buying delta in the underlying. Hedging defines market-maker behaviour and is the mechanical reason gamma exposure matters.
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.
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.
Long
A position that profits when price rises. Buying spot, going long a perp, owning a call, or being short a put are all long positions. Opposite of short.
Short
A position that profits when price falls. Selling spot, going short a perp, owning a put, or being short a call are all short positions. Short positions in crypto carry tail risk because upside is unbounded.
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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