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Definition of 'Delta Spread'
An options trading strategy where the trader initially establishes a delta neutral position. The trader creates this delta neutral position by simultaneously buying and selling options in proportion to the neutral ratio. Using a delta spread, a trader usually expects to make a small profit if the underlying security does not change widely in price. However, larger gains or losses are possible if the underlying security's prices changes significantly in either direction.
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Investopedia explains 'Delta Spread'
The most commonly discussed delta spread is a calendar spread. The calendar spread involves constructing a delta neutral position using options with different expiration dates. In the simplest example, a trader will simultaneously sell near-month call options and buy call options with a later expiration in proportion to their neutral ratio. Since the position is delta neutral, the trader should not experience gains or losses from small prices moves in the underlying security. Rather, the trader expects the price to remain unchanged, and as the near month calls lose time value and expire, the trader can sell the call options with longer expiration dates and hopefully net a profit.
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Directory (Option Strategy)
Search results for 'Delta Spread'
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http://www.investopedia.com/articles/optioninvestor/03/041503.asp
... We use a four-lot because the position delta for each spread is approximately negative
delta, -0.25, which sums to -1.0 if we do it four times. ...
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http://www.investopedia.com/articles/optioninvestor/07/gamm_delta_neutral.asp
... The gamma-delta neutral spread may just be the best middle ground to these concerns
when searching for a way to exploit time decay while neutralizing the ...
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http://www.investopedia.com/university/option-greeks/greeks2.asp
... Strategies, Position Delta. Long Call, Positive. Short Call, Negative. Long Put,
Negative. ... Short Strangle, Neutral. Put Credit Spread, Positive. Put Debit Spread ...
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http://www.investopedia.com/university/optionspreadstrategies/optionspreads1.asp
... found by looking at the different strikes chosen and the resulting differential
position Theta, Delta and Vega resulting from any particular spread construction ...
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http://www.investopedia.com/university/optionspreadstrategies/
... to assess the potential risk (measured in the form of the "Greeks" - Delta, Theta,
Vega ... think you have figured out, read on to learn how a spread might better ...
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http://www.investopedia.com/university/optionspreadstrategies
... to assess the potential risk (measured in the form of the "Greeks" - Delta, Theta,
Vega ... think you have figured out, read on to learn how a spread might better ...
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http://www.investopedia.com/university/option-greeks/greeks5.asp
... Calendar Spread, Positive. ... Conclusion Gamma tells us how fast Delta changes when
the underlying moves, but it has characteristics that are not so obvious across ...
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http://www.investopedia.com/university/optionspreadstrategies/optionspreads2.asp
... Therefore, when IBM drops, the OTM long call option, having the larger Delta because
it ... things being equal, a drop in IBM will cause the option spread value to ...
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http://www.investopedia.com/university/option-greeks/greeks3.asp
... long position Delta. We would be better off using an in-the-money bull
call spread because it gets us long Delta and short Vega. ...
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http://www.investopedia.com/articles/optioninvestor/03/061903.asp
... Figure 1: Deep-out-of-the money December/Mar S&P put time spread. Delta and vega
values are taken from the OptionVue 5 Options Analysis Software S&P futures ...
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