How Does Implied Volatility Affect the Delta of an At-the-Money Option?

Increased implied volatility (IV) generally pushes the Delta of an At-the-Money (ATM) option closer to 0.5. IV reflects the market's expectation of future price swings.

Higher IV increases the probability that the option will end up in-the-money, but it also spreads the probability distribution of potential outcomes. This spreading effect means the option is less sensitive to small immediate moves, keeping Delta near the theoretical maximum of 0.5.

Conversely, lower IV makes the option more sensitive to immediate price changes, also keeping Delta near 0.5 but with a tighter range of outcomes.