- What is an Option Contract?
- Long Call Option Strategy
- Long Put Option Strategy
- Short Call Option Strategy
- Short Put Option Strategy
- Covered Call Option Strategy
- Long Straddle Option Strategy
- Collar Option Strategy
- Bull Call Spread Option Strategy
- Bull Put Spread Option Strategy
- Bear Call Spread Option Strategy
- Bear Put Spread Option Strategy
- Long Strangle Option Strategy
- Short Strangle Option Strategy
- Calendar Spread Option Strategy
- Butterfly Spread Option Strategy
- Cash Secured Put Option Strategy
- Option Greek Theta (Time Decay)
- Option Greek Delta (Price Relationship)
- Option Greek Vega (Implied Volatility)
- Option strategy learning games
Long Call
Short Call
Covered Call
Call Spread
Put Spread
Long Put
Short Call
Call spread
Put spread
Long straddle
Short strangle
long strangle
The Calendar
The Butterfly
- Stock option pricing -
The option Greek delta
and its relationship to the stock price
A stock options delta represents how much the premium of an option will change given a one point move in the underlying stock price. Call options have positive deltas between 0 and 1 (ex. .10, .39, .85, 1.0) and Put options have deltas of -1 to 0.
An options delta is considered to be the sensitivity of the option price relative to an increase or decrease in the underlying stock price.
If the Delta of a long Call option is .75, this means that for every one point move in the underlying stock, the option premium will increase by .75.
Also note that in the money options on less volatile stocks have higher deltas. Conversley out of the money options regarding the same security will have a lower delta.
Understanding the relationship between the option price and the underlying stocks movement will enable investors and traders to implement the appropriate risk management, as well as gauge expected returns from fluctuations in the underlying stock price.