Delta
The rate of change in an option's price for a $1 move in the underlying. Ranges from 0 to 1 for calls and −1 to 0 for puts.
Formula
Δ = ∂V / ∂S (change in option value per $1 change in spot)
Delta measures how much an option's premium changes when the underlying moves by $1. A call with delta 0.50 gains approximately $0.50 per share (or $50 per contract) if the underlying rises $1.
Delta also approximates the probability that an option expires in the money — a 0.20 delta OTM call has roughly a 20% chance of finishing ITM. Deep ITM options approach delta ±1; far OTM options approach 0.
Delta is dynamic: it increases as the option moves ITM (gamma effect) and decreases as it moves OTM. A delta-neutral portfolio is hedged against small directional moves.
Related Terms
At the Money (ATM)
An option whose strike price equals (or is very close to) the current spot price of the underlying.
IntermediateCall Option
An options contract giving the buyer the right to purchase the underlying asset at the strike price before or on expiration.
BeginnerGamma
The rate of change of delta per $1 move in the underlying — it measures how fast delta itself accelerates.
AdvancedIron Condor
A four-leg options strategy that sells an OTM call spread and an OTM put spread simultaneously, profiting when the underlying stays range-bound.
AdvancedLEAPS
Long-term Equity AnticiPation Securities — listed options with expirations longer than one year. Used for longer-horizon directional bets or low-cost covered-call strategies.
IntermediateMax Pain
The strike price at which the largest dollar value of options (calls + puts combined) would expire worthless — the theory being that price gravitates there into expiry as dealers delta-hedge.
AdvancedMoneyness
The relationship between an option's strike price and the current price of the underlying — ITM, ATM, or OTM. Directly drives intrinsic value and delta.
BeginnerPut Option
An options contract giving the buyer the right to sell the underlying asset at the strike price before or on expiration.
BeginnerRho
The sensitivity of an option's price to a 1-percentage-point change in the risk-free interest rate.
AdvancedThe Greeks
The collective name for the sensitivity measures — delta, gamma, theta, vega, rho — that describe how an option's price responds to changes in market variables.
Intermediate