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Traders Glossary

Sigma

Definition

Sigma is generally a term used to represent volatility. It is generally represented as a percentage. The term "one sigma level" refers to the actual change in the underlying asset price.

Related Terms
Delta

The amount by which an option premium moves divided by the dollar for dollar movement in the underlying asset.

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Delta Hedge

A strategy designed to protect the investor against directional price changes in the underlying asset by engineering the overall position delta to zero.

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Delta Neutral

Where a spread position is engineered so that the overall position delta is zero.

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