What Is the Primary Function of Delta in Options Trading?
Delta measures the sensitivity of an option's price (premium) to a $1 change in the price of the underlying asset. It is the most crucial Greek for hedging, as it represents the theoretical equivalent number of shares (or futures contracts) the option behaves like.
A Delta of 0.50 means the option price will change by $0.50 for every $1 move in the underlying asset. It also represents the probability of the option expiring in-the-money.
