Options Made Easy: Your Guide to Profitable Trading, Second Edition

Delta Δ

The Basics

• The option delta is the rate of change of the option price compared with the price movement of the underlying asset price. In other words, delta measures the speed of the option price movement as compared with movement of the underlying asset.

  

• You can think of delta as being the probability of the option expiring In the Money. As a general rule, ATM (At the Money) call options have deltas of 0.5. Therefore, for every $1.00 the stock moves, the call will move at approximately $0.5, that is, half the distance of the underlying stock. Inevitably, as the stock price moves away from the ATM position, the delta value will change ...