Options trading
Delta
Definition
Delta is the estimated change in an option's price for a $1 move in the underlying. Calls range from 0 to 1, puts from 0 to −1, and at-the-money options sit near 0.50 either way. Multiplied by 100, it is the option's rough share equivalent.
Example
Say you hold a $2.00 call with a delta of 0.40 on a $50 stock. If the stock rises to $51, the call would gain about $0.40, to roughly $2.40, or $40 per contract, so it behaves like about 40 shares. A put with a delta of −0.40 would lose about $40 per contract on the same move.
Hypothetical numbers, for illustration only.
Also defined in
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