| Delta | |
 The ratio comparing the change in the price of the underlying asset to the corresponding change in the price of a derivative. |
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 This is sometimes referred to as the hedge ratio. For example, with respect to call options, a delta of 0.7 means that for every dollar the underlying stock increases the call option will increase by $0.70. Put option deltas on the other hand will be negative because, as the underlying security increases, the value of the option will decrease. So a put option with a delta of -0.7 will decrease by $0.70 for every $1.00 the underlying increases in 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. |
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 Getting to know the "Greeks" - Understanding price influences on options positions requires learning delta, theta, vega and gamma. Going Beyond Simple Delta: Understanding Position Delta - Learn about this hedge ratio, which tells us how many contracts are needed to hedge a position in the underlying. Capturing Profits with Position-Delta Neutral Trading - Learn how to gain from a decline in implied volatility with any movement of the underlying. Options Basics Tutorial - An introduction to the world of options, covering everything from primary concepts to how options work and why you might use them. |
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