In this article, we will learn how to perform** Delta Hedging in Excel**. **Delta Hedging** concept is used in **Stock Exchanges**. It is a strategy used for reducing the risk associated with Stock Markets. In **Excel,** we can easily do this. Today, we will show **Delta Hedging Example in Excel**. So, without delay, letâ€™s explore the solutions.

## Download Practice Workbook

To practice by yourself, download the following workbook.

## What Is Delta Hedging?

In stock markets, a method called delta hedging is employed. Itâ€™s employed to lower the risk attached to **Options **and the **Underlying Stocks** of Stock Exchanges. Itâ€™s crucial to reduce risk while maximizing profit. The amount to sell or buy stocks while maintaining the lowest possible risk is indicated by delta hedging.

## 3 Ideal Examples of Delta Hedging in Excel

**Delta Hedging** is used in **Stock Exchange**. We will show you **3** ideal examples of performing Delta Hedging in Excel. Letâ€™s follow the steps to learn how to perform Delta Hedging Example Excel.

### 1. Implement Delta Hedging Using Stocks in Excel

To demonstrate the method we will use a dataset of a companyâ€™s **condition** in the **Stock Market**. We have observed the companyâ€™s **option price** and the **underlying stock **on the **1st** and **31st **of** October 2022**. So, firstly, we will calculate the delta based to show the comparison between the **1st **and **31st **of **October**. After that, we will implement **Delta Hedging** using **Stocks** in Excel.

According to the business model, **Delta** is the ratio of the difference between the **Option Price **and the **Underlying Stock **of the company. And **Delta Hedging** is a trading strategy to reduce directional risk. Letâ€™s see the steps to perform delta hedging in Excel.

**STEPS:**

- Firstly, we will use the following format for showing
**Options**and**Underlying Stocks**. - For
**Option 1**, we have inserted starting and the final values of**Option**and**Underlying Stock**. - After that, click on the
**C8**cell and write the following formula in the**formula bar**to calculate the**Delta**:

`=(C5-C4)/(C7-C6)`

- Then, click
**Enter**to see the result.

This formula mainly indicates** (Final- Initial Option Value)/ (Final-Initial Underlying Value)**.

- In the next step, according to our made format, insert information for
**Option 2.** - Here, we have inserted starting and the final values of
**Option**and**Underlying Stock**. - So, in the next step, we will calculate the
**Delta**for**Option 2**.

- Now, click on the
**C16**cell and write the following formula to**calculate Delta:**

`=(C13-C12)/(C15-C14)`

- Then, click
**Enter**to see the result.

- In the following step, we have to calculate the overall
**Delta**for the company. - To do so, we have to sum up the
**Delta**values for those**options**. - Therefore, select the
**C17**cell and write the following formula:

`=C9+C16`

- Now, press
**Enter**to proceed.

- In this step, you need to calculate the
**number of stocks needed to buy**or**sell**. - So, select the
**C17**cell and write down the following formula:

`=C17*100`

- Then, press
**Enter**to exit from the editing mode and watch the result.

Here, for **US **stock options, with **1 option contract** = **100 shares**. So, **1 **unit **Delta **means **100 shares **or **stocks**. Thatâ€™s why the number of **stocks **will be a multiplication of **Delta** and **100**.

- So, we have calculated the
**number of Stocks**required for**Delta Hedging**. - But, we have not shown yet what to do with these stocks.
- For
**Delta Hedging**, you need to sell your stocks if**Delta**is positive. - After selling these stocks resultant
**Delta**will be**0**. - And, you need to buy these calculated amounts of stocks if
**Delta**is negative. - For this reason, we will write the following formula in the
**D19**cell:

`=IF(C17>0,"Sale","Buy")`

Here, **the IF** **function** determines if the value of **C17** will positive or negative. If the value of the cell is greater than **0**, it will return **Sale** or else it will return **Buy**.

**Read More:** **How to Calculate Delta Between Two Numbers in Excel**

### 2. Apply Options for Delta Hedging in Excel

In the above example, you can observe how we implement **Data Hedging** with the help of **buying **or** selling Stocks**. If the **Delta** is positive, then you need to **sell** some amount of stocks. But suppose, you do not want to sell the stocks. Then, how can you achieve **Delta Hedging**?

There is a solution and we will show you the solution in the following steps. If the resultant **Delta** is **0.6**, then you have to buy contracts with **-0.6**. And if the resultant **Delta** is **-0.6**, then you have to simply buy contracts of **+0.6**. Letâ€™s follow the steps below to learn the method:

**STEPS:**

- Here, we have taken the previous dataset used before.
- In
**Option 1**, every piece of information is unchanged. - But in
**Option 2**, we have changed the information a little bit. - Thatâ€™s why we need to recalculate the value of
**Delta**for**Option 2.** - So, write down the following formula in the
**C16**cell:

`=(C13-C12)/(C15-C14)`

- Then, press
**Enter**to see the resultant value.

- After that, you have to calculate the total
**Delta**for your company. - So, write down the following summing formula in the
**C17**cell:

`=C9+C16`

- After writing, press
**Enter**to proceed.

- So, we have calculated the
**DeltaÂ**value. - Now, we have to buy a
**contract**with**-0.2**so that the resultant**Delta**isÂ**0.** - To do so, write down the following formula in the
**C19**cell:

`=C17*100/(200/100)`

- Finally, press
**Enter**to observe the result.

Here, for **US **stock options, with **1 option contract** = **100 shares**. So, **1 **unit **Delta **means **100 shares **or **stocks**. Thatâ€™s why **0.2** means **0.2*****100**=**20** shares. And we need to divide the share with (total option value/**100). **Here, for **2** options, the total **Option **value is **200**. Finally, the result is **20**/**2**=**10** which indicates **Contracts**.

**Read More:** **How to Calculate Delta Percentage in Excel (4 Easy Methods)**

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**How to Calculate Delta E Color in Excel (4 Suitable Methods)****Calculate Option Greek Delta in Excel (with Easy Steps)****Insert Inverted Delta Symbol in Excel (8 Easy Methods)****How to Type Delta Symbol in Excel (8 Effective Ways)**

### 3. Utilize Management and Adjustments for Delta Hedging

In the last section, we will use management and adjustments for **Delta Hedging Example in Excel**. Previous examples show how to implement **Delta Hedging** by applying **Options** and **Stocks**. Suppose, instantly, **Delta** value changes and you need to take action rapidly. Then, **Management** and **Adjustment** terms come. Letâ€™s follow the steps below to learn how to utilize Management and Adjustments for Delta Hedging.

**STEPS:**

- From the previous example, we have taken this dataset.
- For
**Delta Hedging,**you need to buy**10Â**contracts.

- Suddenly,
**Opinion 1**changes rapidly. - As per expectations, the
**Delta**value of**Option 1**will be**13**. - The
**Final Value of the Option**was supposed to be $**120**. - But, suddenly, the
**Final value of the Option**changes to $**170**. - As a result, the value of
**Delta**is changed to**0.3**. - On the other hand, the value of
**Option 2**is unchanged. - So, the total
**Delta**value is now**0.37**.

- In the following step, we will calculate the actions needed.
- So, write the following formula in the
**F16**cell:

`=F14*100/(200/100)-C19`

- Then, press
**Enter**to proceed.

Here, for **US **stock options, with **1 option contract**=**100 shares**. So, **1 **unit **Delta **means **100 shares **or **stocks**. Thatâ€™s why **0.37** means **0.37*****100**=**37** shares. And we need to divide the share with (total option value/**100). **Here, for **2** options, the total **Option **value is **200**. Finally, the result is **37**/**2**=**18.5~19** which indicates **Contracts**. As already we have planned for buying **10** contracts. So, we need to buy more **19**â€“**10**=**9** contracts.

- In the previous steps, we have shown the amount but did not mention about buy or selling.
- Here, if the
**F16**cell is greater than**0**indicates that we need to buy more. - Otherwise, you need to sell the contracts for
**Delta Hedging.** - Write down the following formula in the
**G17**cell:

`=IF(F16>0,"Buy","Sale")`

- After that, press
**Enter**to see the result.

**Read More: ****How to Use DELTA Function in Excel (3 Practical Examples)**

## Conclusion

In this article, we have demonstrated **how to do the task of delta hedging with example in Excel**. There is a practice workbook at the beginning of the article. Go ahead and give it a try. To read similar articles, check out the **ExcelDemy **website. Lastly, please use the **comment section** below to post any questions or make any suggestions you might have.