What is delta in options?
In one line: Delta is how much an option's price is expected to change when the underlying stock moves $1. Calls have delta from 0 to 1; puts from 0 to −1.
A simple example with numbers
A stock trades at $100. You look at a Call option with a Strike price of $100. It costs $4.00 and has a delta of 0.50.
If the stock rises $1 to $101, the option should rise about 0.50, to about $4.50.
One US stock option contract covers 100 shares. So that $0.50 change is 0.50 × 100 = $50 per contract.
Puts work the other way. A Put option with a delta of −0.40 should gain about $0.40 when the stock falls $1, or $40 per contract.
What different deltas mean
| Delta (call) | Where the strike sits | Behaves like |
|---|---|---|
| About 1.00 | Deep In the money | Almost the stock itself |
| About 0.50 | Near the stock price | Half the stock |
| About 0.10 | Far out of the money | A small piece of the stock |
Many traders also read delta as a rough guide to the chance an option ends in the money. A 0.30-delta option is roughly a 30% chance, by the market's pricing. A rough guide, not a forecast.
Why it matters
Delta tells you how much stock your option "acts like." Owning one call with 0.50 delta is a bit like owning 50 shares, for small moves. That helps you size: three of those calls act like about 150 shares.
Our options trading basics guide covers the rest of the pieces.
A common mistake
Thinking delta stays fixed. It changes as the stock moves and as time passes. If the stock above jumps to $110, the $100 call's delta may climb toward 0.80 or more. Near the Expiration date, deltas swing faster. Check it again before you size or adjust.
Options also lose value as time passes, even if the stock doesn't move. That's Theta, delta's partner.
Questions
What does a delta of 0.50 mean?
The option's price should move about 50 cents for every $1 move in the stock, or about $50 per 100-share contract.
Why is put delta negative?
Puts gain when the stock falls. A negative delta shows the option moves the opposite way to the stock.
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