Education & Tips

Options Greeks: What is Delta?

A Beginner's Guide to Understanding Options Greeks - What is Delta?

Options Greeks: What is Delta?

What is Delta?

Delta is a measure of how much the price of an option will change in relation to a change in the price of the underlying asset. It is often expressed as a decimal between 0 and 1 for call options (options to buy the underlying asset) and between 0 and -1 for put options (options to sell the underlying asset).

A call option with a delta of 0.5, for example, means that for every $1 the underlying asset's price increases, the option's price will increase by $0.50. If the underlying asset's price decreases by $1, the option's price will decrease by $0.50.

If the underlying asset is a stock, delta can also be thought of as the probability that the option will be in-the-money (ITM) at expiration. An option with a delta of 0.5, for example, has a 50% chance of being ITM at expiration.

Delta can be useful for managing risk in options trading. For example, if an options trader is long (bought) a call option with a delta of 0.5, they can offset some of their risk by short selling (selling) half of the underlying shares. This is known as "delta neutral" position.

Delta can also be useful for predicting the impact of changes in the underlying asset price on the value of the option. Delta is not constant, it changes as the underlying price changes, volatility changes and time passes, this change is measured by another greek called Gamma.

Click Here to Learn More About Gamma.

Click Here to Learn About All Of The Greeks.


More Posts in Education & Tips
How to Determine Buys vs Sales with Options Flow?

Using the Bid & Ask to determine Buys vs Sales.

WhaleStream Market-Tracker Analysis Dashboard

WhaleStream’s Market-Tracker Analysis Tool provides further insight into the Dark Pool prints & Option Flow that has come in on the symbol.

What are Options Greeks?

Understanding Options Greeks for Beginners: A Simple Explanation

👀

Follow the Whales in real-time.

🎁

Take 50% OFF With Code: