Best Practices

Weekdays 8:00 – 8:20a CT

Effective Ways to Understand Delta

Best Practices

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

For today’s segment of Best Practices, Tom and Tony discuss effective ways to understand delta. As one of the most prominent Greeks, Delta is a metric often used and reviewed when placing and managing trades.

Delta can be interpreted in 4 ways:

  • Directional Bias
  • Share equivalency
  • Options needed to delta-hedge a stock position
  • Probabilities of market moves
Directional Bias:

A positive delta shows a bullish position, and a negative delta shows a bearish position.

Share Equivalency:

The delta value corresponds to the number of shares the position represents (helps gauge risk).

Delta Hedging:

We can use delta to determine the number of options needed to delta hedge a stock position.

Market Moves:

We can use delta to approximate probabilities.

Best Practices More installments

See All »

Latest tastytrade Videos As of July 07

Most Shared From the last 30 days