Delta
TradingDefinition
Sensitivity of an option's price to a $1 change in the underlying. Calls: 0 to 1; puts: -1 to 0. ATM calls have delta near 0.50; deep ITM calls approach 1.0.
Delta also approximates the option's probability of finishing in the money. Delta is what dealers hedge to neutralize directional exposure; gamma is what they CAN'T fully hedge as the underlying moves.
Delta also approximates the option's probability of finishing in the money. Delta is what dealers hedge to neutralize directional exposure; gamma is what they CAN'T fully hedge as the underlying moves.