The Many Uses Of Option Delta
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In an option chain, the delta for a given option strike price can vary from -1 to +1. Call options have a positive delta for option buyers somewhere between 0 and +1. Calls increase in value when the underlying increases in value. Put options have a negative delta somewhere between 0 and -1 as Put option prices have an inverse correlation to the underlying price.
Note that the signs on these relationships are reversed for option sellers who are short contracts. An option seller that is short a Call will have delta exposure between 0 and -1, while a Put seller will have delta exposure between 0 and +1.
This post originally appeared at TheTechnicalTraders.com.
Category: Options Trading Basics
