A measure of the rate of change in an option's theoretical value for a one-unit change in the price of the underlying security. Call options have positive deltas, while put options have negative deltas. Technically, the delta is an instantaneous measure of the option's price change, so that the delta will be altered for even fractional changes by the underlying entity.
Delta-Neutral: This an "options/options" or "options/underlying instrument" position constructed so that it is relatively insensitive to the price movement of the underlying instruments. This is arranged by selecting a calculated ratio of offsetting short and long positions.
Delta Position: A measure of option or underlying securities delta.
Delta Spread: A ratio spread that is established as a neutral position by utilizing the deltas of the options involved. The neutral ratio is determined by dividing the delta of the purchased option by the delta of the written option.
Variable Delta: A delta that can change due to the change of an underlying asset or a change in time expiration of an option.
Position Delta: The sum of all positive and negative deltas in a hedged position.
Hedge: A conservative strategy used to limit investment loss by effecting a transaction which offsets an existing position. Hedging is taking a position through options or futures opposite to the current position they hold in the market.
Fixed Delta: A delta figure that does not change with the change in the underlying. A futures contract has a fixed delta of plus or minus 100.
Delta-Neutral: This an "options/options" or "options/underlying instrument" position constructed so that it is relatively insensitive to the price movement of the underlying instruments. This is arranged by selecting a calculated ratio of offsetting short and long positions.
Delta-Hedged: An options strategy protecting an option against price changes in the option's underlying instrument by balancing the overall position delta to zero. These hedges are constructed by taking a position in the underlying instrument that is equal in magnitude but opposite in sign (+/-) to the option's delta.