Stock option Delta
Call options will have a positive value and the puts have a negative value. That is because it indicates how much the option will move if the stock goes up. If this chart represented a 1 point down move the calls would be negative and the puts would be positive. The delta gets bigger the farther in the money you go. The far out of the money options have a low Delta, while the options far in the money have a large delta. You can also estimate the price of the stock by figuring out where the the delta hits .5. The Delta will have the biggest effect on the price of an option and knowing how it works can be a great way of predicting how an option will react to different moves. It can also help you to get an idea of your risk and reward on different trades. However there are other factors besides the price of the stock which go into pricing an option. Knowing all of the Greeks can help you get a better estimate on how an option is valued and what will affect it. Other Greek Options Here is a list of the main Greeks options other than Delta to look at when figuring out how an option will move. Gamma - This looks at the change in Delta for each $1 move in the stock. Option Theta - Looks at time’s affect on an option Option Vega - Looks at volatilities affect on options |
