Glossary
Delta
How much an option's price is expected to change for a $1 move in the underlying; also a rough probability of finishing in the money.
On this page
Delta is the Greek that measures how sensitive an option's price is to moves in the Underlying asset asset. A delta of 0.50 means the option's premium is expected to change by about $0.50 for each $1 change in the stock, over a short period and with everything else held steady.
The ranges
- Calls have deltas from 0 to +1: they gain when the stock rises.
- Puts have deltas from 0 to −1: they gain when the stock falls.
- At-the-money options sit near ±0.50.
- Deep in-the-money options approach ±1 and move almost like the stock.
- Far out-of-the-money options have deltas near 0.
Owning 100 shares has a delta of 100. Because a standard US equity option controls 100 shares, traders often express delta per contract in share terms.
Delta changes
Delta is not fixed. As the stock rises, a call's delta climbs toward 1; as expiration approaches, out-of-the-money deltas shrink toward 0 and in-the-money ones grow toward 1. The rate at which delta changes is Gamma.
Two common uses
- Hedging. A market maker who sells 10 calls with a delta of 0.40 is short 400 "share equivalents" and may buy 400 shares to be delta neutral, adjusting as delta moves.
- A rough probability. Traders often read a 0.30 delta as about a 30% chance of finishing in the money. That is a convenient approximation from pricing models, not a forecast, and it ignores how far past the strike the stock might go.