Seeking advices from all you traders

Hi everyone:

I'm a college student taking math of derivative securities class right now. We are using Hull's book. Currently, we are doing a virtual trading project on stocktrak.com to practice delta hedging or delta-gamma hedging. Basically, the professor told us to long or short a certain number of option contacts (determined by him), and we can use delta-hedging to take on a long or short position of stocks to hedge the risk. Since delta changes, we periodically rebalance our position in the equities. Here is the question:

How should I determine volatility in delta-hedging? So far, what I've been doing is calculating implied volatility and using the delta corresponding to the implied volatility to determine the number of equity shares to short/long in my portfolio. Is this the most efficient way to do this project? How would you do it?

My professor has been talking about how sometimes he thinks the option is under or overvalued by the market, so he uses a volatility that's different from the market-implied volatility. How do you tell if an option is overpriced or underpriced? What yardsticks do you use?

For your information, the options we are trading are AMD, LEND, and ORCL options expiring in this April. Do you think delta-gamma hedging is necessary for any of them?

Any help/advice will be appreciated.

Thank you for your time.