# Options Delta : The Basics Options Delta is the ratio of the change in the price of the stock option to the change in the price of the underlying stock
Delta = instantaneous change in value of asset with respect to an underlying risk factor. Option’s delta changes continuously as underlying risk factor changes
Here are some basic characteristics of Options Delta :

• It is the change in the price of an option for a one point moves in the underlying
• Delta of a call option is positive
• Delta of a put option is negative
• Delta increases – in decreasing index
• Delta decreases – in increasing index
• Call options: 0 < Option Delta < 1
• Put options: -1 < Option Delta < 0
• In-the-money options: Delta Option approaches 1 (call:+1,put:-1)
• At-the-money options: Delta is about 0.5 (call:+0.5, put: -0.5)
• Out-of-the-money options: Delta Option approaches 0
• Call Option Delta can be interpreted as the probability that the option will finish in the money
• An at-the-money option : which has a delta of approximately 0.5, has roughly a 50/50 chance of ending up in-the-money
• Put Option Delta can be interpreted as -1 times the probability that the option will finish in the money

Impact of Time : As time passes, the delta of In-the-money options: increases & Out-of-the-money options: decreases
Impact of Volatility : As volatility falls, the delta of In-the-money options: increases & Out-of-the-money options: decreases
Hedging using Options – Delta to neutralize market risk :

• In order to maintain a riskless hedge using an option and the underlying stock, need to adjust holdings in the stock periodically
• An important parameter in pricing and hedging of options
• No. of units of stock should hold for each option shorted in order to create a riskless hedge
• Construction of a riskless hedge is sometimes referred as delta hedging

To get more information on Options Greeks , read Options Basics of Vega ,  Gamma
“The greatest ignorance is to reject something you know nothing about”…If you are invested in Markets, it makes sense to be aware of & have an idea about Options