Option Greeks: Delta
Delta is the change in option premium expected from a small change in the stock price.
It is an important by-product of the Black-Scholes model.
There are three common uses of delta.
- Measure of option sensitivity
- Hedge ratio
- Likelihood of becoming in-the-money
Measure of Option Sensitivity
For a call option, the delta is represented as:
For a put option, the delta is represented as:
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