Delta 101: Understanding Options Trading
Delta, the second Greek letter in options trading, quantifies the change in option price relative to the underlying equity's difference.
The delta of an option is a mathematical function of the market value of the underlying equity, representing how much an option's value changes based on the underlying equity's changes.
Derived from the Greek word "deltos," delta measures the change in an option contract's price in reaction to a $1 move in the underlying asset.
Delta depends on how far an option contract's value is from being at-the-money, where the strike price equals or is near the market price of the underlying security.
Author's summary: Understanding delta is key to options trading.