Delta
Principles of Finance glossary · Valuation of Bonds & Stocks
Definition
The first derivative of an option's value with respect to the underlying price.
Delta in plain English
An option is a contract that lets you bet on where a stock's price is heading without owning the stock outright, and its value bounces around as that stock moves. Delta answers a simple question: if the stock ticks up by $1, how much does the option's value change? A delta of 0.6 means the option gains about 60 cents for that $1 move — think of it as the option's current sensitivity, or how tightly it's tracking the stock right now. It's the single most-watched number for anyone trading options, because it tells you how exposed you really are to the stock's next wiggle.
Related Principles of Finance terms
Principles of Finance practice questions · Principles of Finance flashcards · Principles of Finance study guide