DEFINITION of 'Delta'
The ratio comparing the change in the price of the underlying asset to the corresponding change in the price of a derivative. Sometimes referred to as the "hedge ratio."
Next Up
VIDEO
Loading the player...
BREAKING DOWN 'Delta'
For example, with respect to call options, a delta of 0.7 means that for every $1 the underlying stock increases, the call option will increase by $0.70.
Put option deltas, on the other hand, will be negative, because as the underlying security increases, the value of the option will decrease. So a put option with a delta of 0.7 will decrease by $0.70 for every $1 the underlying increases in price.
As an inthemoney call option nears expiration, it will approach a delta of 1.00, and as an inthemoney put option nears expiration, it will approach a delta of 1.00.
RELATED TERMS

Derivative
A security with a price that is dependent upon or derived from ... 
Zomma
An options greek used to measure the change in gamma in relation ... 
Delta Spread
An options trading strategy where the trader initially establishes ... 
Gamma
The rate of change for delta with respect to the underlying asset's ... 
Expiration Date (Derivatives)
The last day that an options or futures contract is valid. When ... 
Call Option
An agreement that gives an investor the right (but not the obligation) ...
Related Articles

Active Trading
Understanding Delta
A delta is a ratio, sometimes referred to as a hedge ratio. It compares the change in price of an asset, usually a marketable security, with the change in price of a derivative or option based ... 
Options & Futures
Reducing Risk With Options
If you want to use leverage to your advantage, you must know how many contracts to buy. 
Options & Futures
The Basics Of Option Price
Options can be an excellent addition to a portfolio. Find out how to get started. 
Options & Futures
An Introduction To GammaDelta Neutral Option Spreads
Find the middle ground between conservative and highrisk option strategies. 
Options & Futures
Getting To Know The "Greeks"
Understanding price influences on options positions requires learning about delta, theta, vega and gamma. 
Options & Futures
An Alternative Covered Call: Adding A Leg
Try this approach to covered calls to increase your potential for profit in any market. 
Options & Futures
Options Basics Tutorial
Discover the world of options, from primary concepts to how options work and why you might use them. 
Options & Futures
Capturing Profits With PositionDelta Neutral Trading
This trading strategy will show you how to gain from a decline in implied volatility on any movement of the underlying. 
Options & Futures
Options Trading Strategies: Understanding Position Delta
Learn more about the position delta hedge ratio and how it can tell you the number of contracts needed to hedge a position in the underlying asset. 
Options & Futures
The Truth About Naked Short Selling
The media demonizes naked short selling, but in most cases it occurs in a collapse, rather than causing it.
RELATED FAQS

What are the differences between delta hedging and beta hedging?
Hedging is used to reduce the risk of adverse price movements in an asset class by taking an offsetting position in a related ... Read Full Answer >> 
How is a short call used in a bear call spread option strategy?
In a bear call spread option strategy, a short call option is sold at a lower strike price, while a call is bought at a higher ... Read Full Answer >> 
What are the limitations of using delta to hedge options?
Delta hedging is a strategy used to mitigate the risk associated with the price move in the underlying asset of an option ... Read Full Answer >> 
How can you use delta to determine how to hedge options?
The delta of a derivative security tells you the relationship between the underlying security's price and the security's ... Read Full Answer >> 
Why does delta only range from 1 to 1?
Delta measures the sensitivity of an option relative to the underlying asset. It measures the rate of change in the price ... Read Full Answer >> 
What does it mean to say that a straddle is "delta neutral?"
The option Greek delta measures how much an option moves in relation to the changes in an underlying stock price. It's the ... Read Full Answer >>