What Does an Option’s Delta Represent, and How Is It Used for Hedging?

Delta measures the expected change in an option's price for a one-unit change in the underlying asset's price. It is expressed as a value between 0 and 1 for calls, and 0 and -1 for puts.

Delta is primarily used for hedging the price risk of an options position. A portfolio with a net Delta of zero is considered "Delta-neutral," meaning its value should theoretically not change with small movements in the underlying asset's price.

Hedging involves buying or selling the underlying asset to offset the portfolio's net Delta.