Delta (Δ) is a risk metric that estimates the change in price of a derivative, such as an options contract, given a $1 change in its underlying security.
(“What Is Delta in Derivatives Trading, and How Does It Work?” n.d.)
Delta, \(\Delta\), measures the rate of change of the theoretical option value with respect to changes in the underlying asset’s price. Delta is the first derivative of the value \(V\) of the option with respect to the underlying instrument’s price \(S\).
\(\Delta = \frac{\partial V}{\partial S}\)
Delta is the sensitivity of the derivative’s spot price to the underlying value.
- Delta for Call options range from [0, 1]
- Delta for Put options range from [-1, 0]
Bibliography
“Greeks (Finance).” 2022. Wikipedia, October. https://en.wikipedia.org/w/index.php?title=Greeks_(finance)&oldid=1119146188.
“What Is Delta in Derivatives Trading, and How Does It Work?” n.d. Investopedia. Accessed November 7, 2022. https://www.investopedia.com/terms/d/delta.asp.