medium · Quantitative Finance derivatives
A stock trades at 50. A European call option with strike 50 has a delta Δ = 0.55.
Which of the following is the best interpretation of this delta value?
- The trader should buy 0.55 shares for every option sold to maintain a neutral position.
- Vega, not delta, measures how option value shifts per 1-point rise in implied volatility.
- Delta is a risk-neutral hedge probability Φ(d₁), not the real physical odds stock ends above 50.
- The stock price is expected to rise by 55% over the life of the option.
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