Delta (redirected from deltaic)

Delta

The ratio of the change in price of an option to the change in price of the underlying asset. Also called the hedge ratio. Applies to derivative products. For a call option on a stock, a delta of 0.50 means that for every $1.00 that the stock goes up, the option price rises by $0.50. As options near expiration, in-the-money call option contracts approach a delta of 1.0, while in-the-money put options approach a delta of -1. See: hedge ratio, neutral hedge. Call deltas range from 0.00 to +1.00; put deltas range from 0.00 to -1.00. If the call delta is 0.69, the put delta is -0.31 (call delta minus 1 equals put delta; 0.69 -1 =-0.31).

---

delta

The change in the price of an option that results from a one-point change in the price of the underlying stock. For example, a delta of 0.5 indicates that the option will rise in price by ¹/₂ point (50¢) for each 1-point ($1) rise in the price of the underlying stock. Call options have positive deltas; put options have negative deltas.

---

Delta. The relationship between an option's price and the price of the underlying stock or futures contract is called its delta.

If the delta is 1, for example, the relationship of the prices is 1 to 1. That means there's a $1 change in the option price for every $1 change in the price of the underlying instrument.

With a call option, an increase in the price of an underlying instrument typically results in an increase in the price of the option. An increase in a put option's price is usually triggered by a decrease in the price of the underlying instrument, since investors buy put options expecting its price to fall.

---

Delta

What Does Delta Mean?

The ratio that compares the change in the price of an underlying asset to the corresponding change in the price of a derivative; sometimes referred to as the hedge ratio.

Investopedia explains Delta

As an example, with respect to call options, a delta of 0.7 means that for every $1 increase in the underlying stock, the call option will increase by $0.70. Put option deltas, in contrast, will be negative, because as the underlying security increases, the value of the option decreases. Thus, a put option with a delta of -0.7 will decrease by $0.70 for every $1 increase in the stock price. As an in-the-money call option nears expiration, it will approach a delta of 1.00, and as an in-the-money put option nears expiration, it will approach a delta of -1.00.

Related Terms:
• Call Option
• Delta Hedging
• Derivative
• Gamma
• Put Option