FRM Glossary · Part I · Valuation

Delta (Greek)

The rate of change of an option price with respect to the underlying price — the option's effective share exposure.

In more detail

Call deltas range from 0 (deep OTM) to 1 (deep ITM); put deltas range from −1 to 0. Delta is also the hedge ratio: a delta-neutral portfolio needs to trade −delta shares per option to immunise small underlying moves. Gamma is the rate of change of delta — large gamma positions are vulnerable to large moves.