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Option Delta

Measure of how much an option’s value changes for a small move in the underlying price, also used as an approximate hedge ratio.

Option delta measures how much an option’s price changes relative to a one-unit change in the underlying asset price. It ranges from 0 to 1 for calls and 0 to -1 for puts.

In oil trading, delta quantifies sensitivity and helps traders hedge positions. A delta of 0.5 indicates that a $1 crude move changes the option value by $0.50.

Delta also represents approximate probability of exercise. Active management is needed as delta changes with underlying price, time, and volatility.

Understanding delta is essential for options risk management and trading strategy.

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