Performance of Delta-Hedging Strategy on TQQQ Stock Options

Abstract

This paper studies the performance of the same incremental hedging strategy of stock options. Especially when the stock market fluctuates greatly, this delta hedging strategy can always ensure investors’ fund always keep in a relative safe level. Thus, it can help individuals and institutional investors to build their portfolios and choose hedging strategies. This paper use the data of ten options of TQQQ stock to calibrate the implied volatility of the stock. Then, by calculating the implied volatility, a hedge portfolio is formed, including a specific option unit of the company and the incremental shares of the underlying stock. Finally, this paper evaluate the performance of the hedged portfolio. The results show that, the hedging strategy of TQQQ stock option performs well. The results of this paper are helpful for individual and institutional investors to choose the most suitable hedging strategies according to the nature of the underlying assets.