Neutral hedge

Neutral hedge

Hedge that is expected to yield a dollar-neutral result of the combined position, regardless of price change in any part of the hedge securities. For any convertible trading at a premium, this ratio is less than 100%. The higher the convertible premium, the lower a ratio must be to be neutral. See: Delta.

Neutral Hedge

A series of positions and offsetting positions on a security the results in a risk-free return. See also: Compound option.