Rebalancing Techniques

Rebalancing techniques are the methods used to restore the intended risk and target ratios of a portfolio as prices change. Because the values of assets in a portfolio constantly shift, the original risk profile can quickly become distorted.

A delta-neutral strategy, for example, needs constant rebalancing as the delta of an option changes with price movement. In crypto derivatives, this is a fast-paced, high-frequency task often handled by automated systems.

Failure to rebalance correctly can lead to excessive exposure and unexpected risks. It is a foundational aspect of keeping a portfolio aligned with the original strategy's goals.