What Is Delta?
Delta is the first-order Greek measuring how much an option's price changes when the underlying stock moves $1. A call with delta 0.50 gains roughly $0.50 if the stock rises $1; a put with delta -0.40 loses about $0.40 on the same move.
Delta also approximates the probability that an option finishes in-the-money at expiration — a delta-0.30 call has roughly a 30% chance of being ITM. This shortcut isn't exact, but it's close enough for trade-decision purposes.
Delta changes as the underlying moves; that rate of change is called gamma. Practical use: portfolio delta gives net long/short exposure across all positions. A 'delta-neutral' portfolio has roughly zero directional exposure — useful for traders harvesting time decay or volatility moves without directional bets.
Related terms
- Gamma — Rate of change of delta — measures how fast directional exposure shifts.
- Theta — Time decay — how much an option loses in value per day as expiration approaches.
- Vega — Sensitivity of an option's price to a 1-point change in implied volatility.
- Options Contract — A derivative giving the right (but not obligation) to buy or sell an asset at a set price by a set date.