Delta 101: Understanding Options Trading
Delta is the second Greek letter used in options trading, quantifying the change in option price relative to the underlying equity's value.
The delta of an option is a mathematical function of the market value of the underlying equity, representing how much an option's value will change based on changes in the underlying equity.
Derived from the Greek word "deltos," delta is a mathematical measure that determines the change in the price of an option contract in reaction to a $1 move in the underlying asset.
Delta is dependent upon how far away an option contract's value is from being at-the-money, where the call or put option's strike price is equal to or near the market price of the underlying security.
Author's summary: Understanding delta is crucial for options trading.
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