I keep seeing delta mentioned everywhere but honestly don’t get what it means for options trading.
Can someone break it down in basic terms? The explanations I find use too much jargon.
I just want to grasp the basics before using it in my trades.
Delta indicates how much your option’s price shifts when the stock moves $1.
Delta measures how much an option price shifts with a $1 move in the stock. A call option with a delta of 0.7 increases by about 70 cents if the stock rises by $1.
Call options benefit from stock price rises while put options lose value when stocks increase.
Options nearing expiration or far from being in-the-money have lower delta values.
Delta tells you how much your option’s price moves when the stock moves $1.
Learned this the hard way with Apple calls. Stock went up $2, but my option barely budged because delta was only 0.3.
Made 60 cents per contract instead of the $2 I expected. Would’ve saved myself the disappointment if I’d checked delta first.
Delta indicates how much an option’s price changes with a $1 stock movement. A delta of 0.5 means a 50 cent change in option price. Higher delta means closer correlation to stock price.