Delta – ratio, which displays the change in the price of the asset, commonly circulating securities, with a corresponding correlation of the price of its derivative instrument. For example, if a option on a stock shows a delta value 0,65, this means, what, if basic stock will increase in value by 1 dollar per share, the option on it will increase by 0,65 dollars per share under other similar criteria.
The value of the delta can be positive or negative. For example, delta for option call will always be in the spectrum from 0 to 1, since with the increase in the price of the underlying asset, call options grow in value. The deltas of options are constantly defined in the spectrum from -1 to 0, for the reason that, that with the increase in the underlying security, the price of options will decrease.
Delta is an important variable, interconnected with the pricing model, used by options traders. Experienced traders calculate, how to value your options, using difficult models, often reminiscent of the Black-Scholes model. Delta serves as a leading value in these models, helping as buyers, and options traders, since it allows financiers and participants of exchange trading to determine the probable fluctuations in the prices of options when the price of the underlying security changes.
The calculation of the delta is made in the present time using computer algorithms, publishing delta values for broker clients all the time. The delta value of the option is often used by participants in exchange trading and financiers to notify them of their own choice when buying or selling options..
