The change in price of a call option for every one-point move in the price of the underlying security. also called delta.

The ratio of derivatives contracts to the underlying risk exposure.

A ratio, usually expressed as a decimal between 0 and 1, representing the likely movement in an option premium for a given move in the underlying market price of the relevant commodity, currency or investment instrument. The hedge ratio indicates how much of the underlying asset to hold against an option position in order to achieve a riskless state. (See also Delta).

Where a hedge instrument and the underlying are not perfect arbitrage equivalents, the dollar value of hedge instruments required to hedge the risk in one dollar of underlying. Thus if a portfolio has a beta of 0.85 with respect to the DAX Index and the investment manager seeks to be completely hedged against DAX risk, then ,EUR 0.85 worth of DAX contracts should be sold for each ,EUR 1 of portfolio value.

the ratio of options to buy or sell against a spot position in order to create a riskless hedge.

the ratio, determined by the optionÃ¢â‚¬(tm)s delta, of futures to options required to establish a position involving no price risk.

The number of futures or options required to hedge a given exposure in the cash market. A-C D-F G-I J-L M-O P-S T-Z

The relationship between the number of contracts required for a direct hedge and the number of contracts required to hedge in a specific situation. The concept of hedging is to match the size of a positive cash flow from a gaining futures position with the expected negative cash flow created by unfavorable cash market price movements.

The amount of an underlying instrument or the number of options which are needed to hedge a covered option.

The mathematical quantity that is equal to the delta of an option. It is useful in facilitation in that a theoretically riskless hedge can be established by taking offsetting positions in the underlying stock and its call options.

The ratio of volatility of the portfolio to be hedged and the return of the volatility of the hedging instrument.

The number of stocks required to hedge against the price risk of holding an option or convertible security.

The number of futures contracts needed to hedge a cash market position.

For options, ratio between the change in an option's theoretical value and the change in price of the underlying stock at a given point in time. For convertibles, percentage of a convertible bond representing the number of underlying common shares sold against the shares into which bonds are convertible. If a preferred is convertible into 2000 common shares, a 75% hedge ratio would be short ( long) 1500 common for every 1000 preferred long (short). See: Delta.

A ratio that equals the delta of an option. By taking offsetting positions in the underlying stock, one can achieve a theoretically riskless hedge.

For futures the number of contracts required to hedge one contract's value of the underlying asset. For options see Delta.

1) Ratio of the value of futures contracts purchased or sold to the value of the cash commodity being hedged, a computation necessary to minimize basis risk. 2) The ratio, determined by an option's delta, of futures to options required to establish a riskless position. For example, if a $1/barrel change in the underlying futures price leads to a $0.25/barrel change in the options premium, the hedge ratio is four (four options for each futures contract).

1. A ratio comparing the amount you are hedging with the size of the position being hedged against. 2. A ratio comparing the value of futures contracts purchased or sold versus the value of the cash commodity being hedged against.

The amount of future exchange contracts, options, or underlying financial instruments, purchased or sold against a position to accomplish a hedge of the position.