What Is the Significance of the ‘Delta’ Option Greek in Risk Management?

Delta measures the sensitivity of an option's price to a one-unit change in the underlying asset's price. It is crucial for risk management as it tells a trader how much their option position will gain or lose for a small move in the underlying.

A delta of 0.50 means the option price will move 50 cents for every dollar the underlying moves. Traders use delta to 'delta hedge' their positions, aiming for a net portfolio delta of zero to become market-neutral.

This helps to isolate the profit/loss from changes in volatility or time decay.