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Binary Options: Fixed Odds Financial Bets by Hamish Raw

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4. Delta & Underlying

4.0 Introduction

Delta is a ratio that measures how much the bet price will change owing to a change in the underlying.

Of all the ‘greeks’ the delta is probably the most utilised amongst traders. The delta is the gradient of the slope of the binary options price profile versus the underlying, and measures the exposure of the option to a movement in the underlying. The attraction of the delta as a meaningful number is that the delta translates bets, whether single bets or a portfolio of bets, into an equivalent position of a tradeable entity, i.e. the underlying. An upbet with a delta of 0.5 means that if, for instance, a share price goes up 1¢, then the upbet will increase in value by ½¢. Alternatively, a long 100 ...

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