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What is Options Delta?

The first Greek we will learn about in this video series is Delta, which measures how much an option's price will change for a 1% change in the price of the underlying security or index. For example, a Delta of 0.40 means that the option's price will theoretically move $0.40 for every $1 move in the price of the underlying stock or index.

Call options

Have a positive Delta that can range from zero to 1.00.
At-the-money options usually have a Delta near .50.
The Delta will increase (and approach 1.00) as the option gets deeper in the money.
The Delta of in-the-money call options will get closer to 1.00 as expiration approaches.
The Delta of out-of-the-money call options will get closer to zero as expiration approaches.

Put option Delta

Put options have a negative Delta that can range from zero to -1.00.
At-the-money options usually have a Delta near -.50.
The Delta will decrease (and approach -1.00) as the option gets deeper in the money.
The Delta of in-the-money put options will get closer to -1.00 as expiration approaches.
The Delta of out-of-the-money put options will get closer to zero as expiration approaches.
You also might think of Delta, as the percent chance (or probability) that a given option will expire in the money.

For example, a Delta of 0.40 means the option has about a 40% chance of being in the money at expiration. This doesn’t mean your trade will be profitable. That of course, depends on the price at which you bought or sold the option.

You also might think of Delta, as the number of shares of the underlying stock, the option behaves like.

A Delta of 0.40 also means that given a $1 move in the underlying stock, the option will likely gain or lose about the same amount of money as 40 shares of the stock.


Tune in tomorrow for a video on Delta Hedging.