Definition of Delta
What is Delta
Delta is a ratio that measures the expected change in an option’s price for every $1 change in the underlying security. In effect, it is a measure of an option’s sensitivity to changes in price of the underlying asset.
An option contract with a delta of .50 can expect a $.50 move or change in the price of the option given a $1 change, up or down, in the underlying, assuming all else being equal.
A call option can have a delta that ranges from 0 to positive 1 while a put option can have a delta that ranges from 0 to negative 1. Delta is commonly viewed as the option’s speed.
Delta is one of the first-order Greeks or major Greeks.
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