How Does Delta Measure an Option’s Price Sensitivity?
Delta is one of the option Greeks and measures the change in an option’s price for a one-unit change in the underlying asset’s price. A call option’s Delta ranges from 0 to 1, and a put option’s Delta ranges from -1 to 0.
A Delta of 0.50 means the option price is expected to move 50 cents for every $1 move in the underlying asset.
Glossar
Fee Sensitivity in Defi
Behavior ⎊ Fee sensitivity in DeFi describes how user behavior changes in response to fluctuations in network transaction costs.
Risk Management Measure
Measure ⎊ A risk management measure is a specific action or tool implemented to identify, quantify, and mitigate potential losses in a derivatives portfolio.
Vega Sensitivity Drop
Quantification ⎊ Vega sensitivity drop denotes a pronounced decrease in an option portfolio’s responsiveness to changes in implied volatility, typically observed following significant market events or shifts in underlying asset price dynamics.
Managing Option Sensitivity
Control ⎊ Managing Option Sensitivity refers to the continuous, systematic process of controlling a derivatives portfolio's exposure to the various risk factors quantified by the options Greeks.
Extra Security Measure
Mitigation ⎊ Extra security measures within cryptocurrency, options trading, and financial derivatives represent proactive protocols designed to curtail systemic and idiosyncratic risks, extending beyond standard risk management frameworks.
Option Premium Rate Sensitivity
Sensitivity ⎊ This measures the rate of change in an option's premium relative to a one-unit change in the risk-free interest rate, a key component of option pricing models.
In the Money Probability
Calculation ⎊ In the Money Probability, often referred to as the Delta of an option or more precisely as the cumulative normal distribution function N(d2) in the Black-Scholes framework, quantifies the likelihood that an option will expire with intrinsic value.
Risk Control Measure
Strategy ⎊ A risk control measure is a predefined strategy implemented by traders to mitigate potential losses in financial markets.
Low Sensitivity to Price
Duration ⎊ This characteristic describes an instrument or position whose value is minimally affected by immediate, small fluctuations in the underlying asset's spot price, often seen in deep out-of-the-money options or certain long-term contracts.
Gas Fee Sensitivity
Volatility ⎊ Gas Fee Sensitivity, within cryptocurrency and derivatives markets, represents the degree to which transaction costs impact trading strategies and portfolio performance.