Delta Hedging

How Draconic reads it

When a market maker sells a call, they acquire positive delta; they profit if price rises. To remain directionally neutral, they buy the underlying in proportion to the option's delta. As price moves and delta changes, they must continuously rebalance. This rebalancing creates systematic buying and selling pressure at specific price levels, not based on price action or fundamental views, but purely on the mechanics of maintaining a delta-neutral book. In aggregate across all outstanding options positions, this hedging creates the gamma exposure regime that determines whether price moves are dampened or amplified. Understanding delta hedging is understanding why options positioning creates mechanical support and resistance that never appears on a standard chart.