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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
How much an option price moves for every $1 move in the stock.
Why It Matters
Delta tells you how sensitive your option is to stock movement. A delta of 0.50 means if the stock goes up $1, your option gains $0.50. Call deltas range from 0 to 1; put deltas from 0 to -1. Delta also roughly estimates the probability of expiring in-the-money.
Key Points
- ATM options have ~0.50 delta; ITM options approach 1.0; OTM options approach 0
- Delta is also the 'hedge ratio' - 0.50 delta means 50 shares hedge 1 contract
- Position delta: multiply contract delta by 100 shares to know your true exposure
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Common Questions
How much an option price moves for every $1 move in the stock. Delta tells you how sensitive your option is to stock movement. A delta of 0.
Delta tells you how sensitive your option is to stock movement. A delta of 0.50 means if the stock goes up $1, your option gains $0.50. Call deltas range from 0 to 1; put deltas from 0 to -1. Delta also roughly estimates the probability of expiring in-the-money.
ATM options have ~0.50 delta; ITM options approach 1.0; OTM options approach 0
Delta is also the 'hedge ratio' - 0.50 delta means 50 shares hedge 1 contract
Position delta: multiply contract delta by 100 shares to know your true exposure