# Hedging digital calls

From what I have read, digital options are difficult to hedge near expiration because, around the strike, small moves in the underlying asset price can have very large effects on the value of option and the option delta. This means we would have to buy/sell large amounts of shares frequently to stay well hedged when using dynamic delta hedging.

It seems that near expiration of the option it is better to use a static call-spread hedge.

1. When is the best time to switch from dynamic hedging to a call-spread hedge? For example one example question I am reading asks "would you build your call spread hedge the day prior to maturity"?
2. Is there anyway to prove that it is more beneficial to use static hedging near expiry?

• Just to clarify I have sold a digital call option, in this example. When you say I might as well just trade out of the digital call, do you mean just keep delta hedging as best I can.  A counterparty might not want to trade a very tight call spread which perfectly hedges my short digital call position. However I would of thought I could go to the market and create a sythentic call spread with puts/calls. – Calypso Mar 28 '17 at 21:45