delta hedging, basically, means, borrow money and buy stock at time of issue (in case of call option). and as time and stock price changes, the level of money borrowed and stock held change accorrdingly. this leads to two results:
1. S > K: recieve K and buy rest of stock => pay stock and repay loan
2. S < K: sell stock and repay loan.
the level of money borrowed and stock held at expriy are different in the two cases, and the difference are usually quite big.
if S is close to K, at the time of expiry, we are not sure if case 1 and 2 will happen and therefore not possible to hedge.
hope it helps
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