📐 Stock Option Delta

Definition

Delta (Δ) measures how much the price of an option is expected to change for every $1 change in the underlying stock price.
For call options, delta ranges from 0 to +1. For put options, it ranges from -1 to 0.

Why It Matters

Directional Exposure: Delta shows how sensitive an option is to stock price movement.
Probability Estimate: Delta approximates the chance the option will expire in-the-money.
Hedging Tool: Traders use delta to build delta-neutral portfolios and manage risk.

Example

Suppose a stock is trading at $100 and you buy a $105 call option with a delta of 0.25.
If the stock rises to $101, the option price is expected to increase by $0.25, all else being equal.

Key Insights

Delta Range	Option Type	Interpretation
0 to +1	Call Option	Positive sensitivity to stock price increases
-1 to 0	Put Option	Negative sensitivity to stock price increases
~0.50	At-the-money	Most responsive to price changes