7.1 – Delta of an Option
For an options trade to be successful in the market, several forces need to work in the option trader’s favour. These forces are collectively called ‘The Options Greeks’.
We will learn more in this video.
We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.
Key takeaways from this chapter
- Option Greeks are forces that influence the premium of an option
- Delta is an Option Greek that captures the effect of the direction of the market
- Call option delta varies between 0 and 1; some traders prefer to use 0 to 100.
- Put option delta varies between -1 and 0 (-100 to 0)
- The negative delta value for a Put Option indicates that the option premium and underlying value move in the opposite direction
- ATM options have a delta of 0.5
- ITM option has a delta of close to 1
- OTM options have a delta of close to 0.