Editing Openai/691df491-0d78-8005-ad11-12760f0fa16d (section)

===== Imagine you walk up to a market maker and buy a $220 NVDA call for $5 (=$500 per contract). That’s like you buying a car from them for $5,000. =====

Now the dealer thinks:

: 

So to protect themselves, they don’t just pocket your $5K and walk off.
Instead, they buy car parts (NVDA shares) to match your option’s value as it grows — so if the car’s value skyrockets, they already own it.
That way they don’t get blown up.

That’s delta neutral hedging in action:
* The option gains value → they own stock → that rising value pays them back
* If the option dies worthless → they just keep your $5K (premium)

✔️ Win-win for them either way, as long as they hedge properly.