What Is the Role of ‘Delta’ in Estimating the Potential Slippage of an Options Hedge?

Delta measures the sensitivity of the option's price to a one-unit change in the underlying asset's price. When hedging an options position, a trader must buy or sell Delta units of the underlying asset.

The potential slippage of the hedge is directly related to the slippage of the underlying asset trade, scaled by the option's Delta. A high-Delta option requires a larger hedge in the underlying, increasing the potential for slippage on the hedge execution.