Delta

The option delta of a derivative is the ratio between a change in the price of that derivative and the change in prince of the underlying asset it is a derivative of.

Delta values range from 1.0 to -1.0.

• A delta of 1.0 gives an exact correlation with the performance of the underlying. A call option necessarily has positive delta : as the underlying asset increases in price, the call value also increases.
• A delta of -1.0 does the exact opposite of what the underlyer is doing. A put option necessarily has a negative delta. Well of course it does: you shorted the underlyer. As the underlying security increases in value, your put goes out of the money.
• A delta of 0 means the option and the underlyer are uncorrelated - there performance with respect to each other is random. A derivative with a delta of nil basically isn’t a derivative of that underlying.

Technically, the value of the option’s delta is the first derivative of the value of option with respect to the underlying security’s price.

See also

• Greeks - the home of all things Greek on this site. It’s our own little Athens.
• Alpha
• Beta
• Delta
• Nu - a trick for young players — and those with a degree in Classics.
• Omega — the end of days, and the right time for backtesting
• Vega — not really a Greek at all, but a maudlin singer-songwriter
• Enhanced beta
• Leveraged alpha