Delta Scenarios — Directional Exposure
How delta magnitude determines how much dealers hedge per dollar of price move
Scenario 1 · Long Delta + Price Up — Full Gains
High positive delta captures upside — each point of price rise adds proportionally
📈 Long Δ + up move = full directional profit
Scenario 2 · Long Delta + Price Down — Full Loss
Positive delta hurts in downmoves — losses proportional to delta magnitude
📉 Long Δ + down move = directional loss
Scenario 3 · Short Delta + Price Up — Loss
Negative delta loses on rallies — dealer must buy to rebalance hedge
⚡ Short Δ + up = forced buyer at highs
Scenario 4 · Short Delta + Price Down — Profit
Negative delta profits in downmoves — positions gain as price falls
📉 Short Δ + down = directional profit
Price
Delta level
Hedge (profit direction)
Hedge (loss direction)