Delta 101: A Deep Dive into the Options Greek
Delta is the second Greek letter used in options trading, representing the change in option price relative to the difference in the underlying equity.
Delta is a quantitative representation of how much an option's value will change based upon changes in the underlying equity, derived from the Greek word "deltos".
- Delta measures the change in the price of an option contract in reaction to a $1 move in the underlying asset.
- It is dependent upon how far away an option contract's value is from being at-the-money.
Delta is a mathematical function of the market value of the underlying equity.
At-the-money occurs when a call or put option's strike price is equal to or very near the market price of the underlying security.
Author's summary: Understanding delta in options trading.