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Delta


Meaning of Delta

Delta measures the change in Option price for a unit change in the price of underlying. So, if my Delta is 0.46 it shows that for each unit increase in underlying Options price will increase by 0.46 and for each unit decrease in underlying my Options price will decrease by 0.46.

Important Points for Delta

When you buy Call Option, Positive Delta multiplies by Positive Quantity, hence gives Positive Portfolio Delta. This signifies that buying Call Option means Bullish Position.

When you sell Call Option, Positive Delta multiplies by Negative Quantity, hence gives Negative Portfolio Delta. This signifies that Selling Call Option means Bearish Position.

When you buy Put Option, Negative Delta multiplies by Positive Quantity, hence gives Negative Portfolio Delta. This signifies that buying Put Option means Bearish Position.

When you sell Put Option, Negative Delta multiplies by Negative Quantity, hence gives Positive Portfolio Delta. This signifies that Selling Put Option means Bullish Position.

Delta Graph



DELTA with respect to change in SPOT PRICE:



Observations: As spot price increases​


DELTA with respect to change in STRIKE PRICE:



Observations: As Strike price Increases​​

DELTA with respect to change in DAYS TO EXPIRY:



Observations: As days to expiry decreases / time increases​​​​

Both Call and Put Premium decrease.
CallDelta decrease and PutDelta increases (Both move towards 0.5).
ATMOptions approaches to 0.5 or -0.5
ITMOptions approaches to 1 or -1
OTMOptions approaches to 0

DELTA with respect to change in VOLATILITY



Observations: As Volatility increases​​​

Both Call and Put Premium increases.
CallDelta increases and PutDelta decreases.

DELTA with respect to change in RATE OF INTEREST:



Observations : As Rate of Interest increases​​​

Summary of DELTA Relationship with other Variables:







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