Introduction to Delta

Module Units

Introduction To Delta

Let us start with the first option-greek ‘Delta.’

Delta measures the change in option price for a unit change in the price of underlying. So, if an option has Delta 0.47 it shows that if the underlying price changes by ₹1, the option price will change by ₹0.46.

Delta varies from a range of -1 to 1. For call options, delta is 0 to 1 and for put options, delta ranges from -1 to 0.

Let’s discuss some important points with respect to Delta.

The Delta of Call Option is always positive and the 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
When you buy Call Option, Positive Delta multiplies by Positive quantity (quantity is considered positive when we go long on option), 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 (quantity is considered negative when we go short on option), 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. This signifies that selling Put Option means Bullish position.

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