InvestorQ : I hear a lot about delta of options. What exactly does that mean?
indhumathi Sayani made post

I hear a lot about delta of options. What exactly does that mean?

Answer
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shrinidhi Rajan answered.
2 years ago


Both the call options and the put options have deltas because both calls and puts tend to get impacted by price movements in the underlying. For example, if the spot price of the Nifty index goes up then the price of the call option will go up and if the spot Nifty goes down then the price of the put option will go up. Since a call option has a positive relationship with the underlying price it always has a positive delta while the put option will always have a negative delta because of its inverse relationship with the spot price of the Nifty.

In case of call options, the delta will typically range from 0 to 1 and in case of put options the delta will range from 0 to -1. That is why call options are said to have positive delta while put options are said to have negative delta.

Nature of Position

Nature of profits

Nature of movement

Nature of Delta

Long on Call Option

Unlimited

Positive with Index

Positive Delta

Long on Put Option

Unlimited

Negative with Index

Negative Delta

Short on Call Option

Limited to Premium

Negative with Index

Negative Delta

Short on Put Option

Limited to Premium

Positive with Index

Positive Delta