Delta

Delta measures how much the price of a derivative, such as an option, is expected to move for every $1 change in the price of its underlying asset. This value plays a key role in options trading and risk management, helping investors understand and manage their exposure. For call options, delta ranges from 0 to 1, while for put options, it ranges from -1 to 0. A positive delta means the option’s value rises as the underlying asset’s price increases, while a negative delta indicates the opposite. Mathematically, delta is the first derivative of the option’s value with respect to the price of the underlying asset. It is also known as the hedge ratio, indicating how many units of the asset are needed to offset the price risk in a derivative position.