Options delta

Discussion in 'Options' started by clarodina, Aug 18, 2010.

  1. What exactly is delta of 1.00 for a particular option? Comparing the stock price % change and the delta 1.00 option price % change they are different even in absolute change. Is there option price % change same as stock price % change or in absolute change same?
  2. If stock moves by one dollar, the option price moves by one dollar. It is not in percentage terms, but absolute dollars.
  3. donnap


    Obviously, the % change will be different, because the option has a lower value than the UL.

    Generally, options with a delta of 1 have less liquidity than strikes close to ATM. Some have almost no liquidity.

    In terms of absolute change, based on last sale, the delta 1 option may trade little, while the UL fluctuates. So absolute change based on sales will usually be inaccurate.

    Absolute change based on market quotes will, generally be more accurate, but because the delta 1 option has little volume, the B/A will be wider and the price may be difficult to define.

    If the % changes are the same, it's more of a coincidence and you would be more likely to see this with ATM or OTM options.

    It's also a more of coincidence if the absolute change is the same. You'd see this more often with ITM options, but even other options may have quotes where the absolute change is similar, if the changes are based on last sale.
  4. MTE


    Delta of 1 means that for each point move in the underlyling the option moves by 1 point.