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+Chapter 30: Stock Index Hedging Strategies 545 
+In this case, the number of puts is determined by using the same formula as in 
+the above example and then also dividing by the absolute value of the delta: 
+Puts to buy = $720,000 / (100 X 180) / 0.60 
+= 67 
+Cost of protection: 67 x $450 = $30,150 
+In this case, the portfolio manager is spending much more for the puts, but for 
+his additional expense, he acquires immediate protection for his portfolio. 
+Furthermore, there is some intrinsic value to the puts he bought (2 points, or $13,400 
+on 67 of them). If the UVX Index drops at all, these puts will immediately begin to 
+hedge his entire portfolio against loss. Of course, if the market rises, he loses his 
+much more expensive insurance cost. 
+When one uses options instead of futures to hedge his position, he must make 
+adjustments when the deltas of the options change. This was not the case when futures 
+were used; perhaps with futures, one might recalculate the adjusted capitalization of 
+the portfolio occasionally, but that would not be expected to affect the quantity of 
+futures to any great degree. With put options, however, the changing delta can make 
+the position delta short when the market declines, or can make it delta long if the mar­
+ket rises. This situation is akin to being long a straddle the position becomes delta 
+short as the market declines and becomes delta long as the market rises. 
+Basically, the adjustments would be same as those that a long straddle holder 
+would make. If the market rallied, the position would be delta long because the delta 
+of the puts would have shrunk and they would not be providing the portfolio with as 
+much adjusted dollar protection as it needs. The investor might roll the puts up to a 
+higher strike, a move that essentially locks in some of his stock profits. Alternatively, 
+he could buy more puts at the current (low) strike to increase his protection. 
+Conversely, if the market had declined immediately after the position was 
+established, the investor will find himself delta short. The delta of the long puts will 
+have increased and there will actually be too much protection in place. His adjust­
+ment alternatives are still the same as those of a long straddle holder - he might sell 
+some of the puts and thereby take a profit on them while still providing the required 
+protection for the stock portfolio. Also, he might roll the puts down to a lower strike, 
+although that is a less desirable alternative. 
+HEDGING WITH INDEX CALLS 
+Another strategy to protect a stock portfolio is to establish a ratio write using short 
+calls against the long stock. This is the opposite of using puts for protection, in that 
+it is more equivalent to being short a straddle.