Thursday, October 4, 2012

OPTION GREEKS : DELTA (Δ):


DELTA (Δ):

Delta measures the change in option price for a unit change in the price of underlying. So, if my delta is 0.46 it shows that for each unit increase in underlying options price will increase by 0.46 and for each unit decrease in underlying my options price will decrease by 0.46.
Important points for DELTA:
- Delta of Call Option is always positive and Delta of Put Option is always negative.
- When you buy Call Option, delta is positive and when you sell Call Option, delta is negative.
- When you buy Put Option, delta is negative and when you sell Put Option, delta is positive.
- Call Delta ranges from 0 to 1 and Put Delta ranges from 0 to -1.
- Total of absolute value of Call Delta and Put Delta always comes to 1.
- Delta of Future is always 1.
When you buy Call Option, Positive Delta multiplies by Positive Quantity, hence gives Positive Portfolio Delta. This signifies that buying Call Option means Bullish Position.
When you sell Call Option, Positive Delta multiplies by Negative Quantity, hence gives Negative Portfolio Delta. This signifies that Selling Call Option means Bearish Position.
When you buy Put Option, Negative Delta multiplies by Positive Quantity, hence gives Negative Portfolio Delta. This signifies that buying Put Option means Bearish Position.
When you sell Put Option, Negative Delta multiplies by Negative Quantity, hence gives Positive Portfolio Delta. Thsi signifies that Selling Put Option means Bullish Position.


Buy Call
Delta Long
Sell Call
Delta Short
Buy Put
Delta Short
Sell Put
Delta Long






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