What is Delta (Δ)?
Measures how much an option price changes for a $1 move in the underlying.
📖 Complete Definition
Delta is one of the most important option Greeks, measuring the rate of change of option price relative to a $1 move in the underlying asset. Delta ranges from 0 to 1 for calls (0 to -1 for puts). A delta of 0.50 means the option gains $0.50 for every $1 the stock rises. Delta also approximates the probability of expiring in-the-money.
📐 Formula
Δ = ∂V/∂S (partial derivative of option value with respect to stock price)
💡 Examples
- →A 0.70 delta call gains $70 when the stock rises $1 (per contract)
- →ATM options typically have around 0.50 delta
❓ Frequently Asked Questions
How do I use delta for position sizing?
Delta tells you the equivalent stock exposure. 10 contracts with 0.50 delta = 500 share equivalent exposure. Use this to size positions appropriately.
Does delta stay constant?
No, delta changes as the stock moves (measured by gamma), time passes, and volatility changes. Deep ITM options have delta near 1, deep OTM near 0.
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