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As a Stock Price changes, the price of the Options Contracts on that Stock will change. The rate of change in the price of the Option is the Delta. An Option which is In-the-Money will have a Delta of 1.

The term Delta describes the sensibility of the change in price of a Derivative Contract, such as an Option or Futures, to the change in price of the underlying security or commodity. The Delta of an Option indicates the Hedging Ratio required to become Delta Neutral. Delta values can be positive or negative depending on the type of option. Calls are positive 0 to 1 and Puts are negative 0 to -1. If an Option Contract is Out-of-the-Money and the Price continues to move away from the Strike Price, the Delta will move towards 0. For a Call this will be a decreasing Price. OK, so why exercise the Option when the Stock is cheaper on the Exchange. For a Put Option this is for increasing Price, as the Stock can be sold for more on the Exchange. For an Option Contract, Put or Call, which is In-the-Money, this will have a Delta of -1 or 1, respectively.


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Warren William

Meet the author behind Smartest-Data. Warren William has a career in Finance and Investments extending over 35 years, both on the Buy Side and Sell Side. His most recent roles include, developing Institutional Risk Management Programs for managing Equity and Fixed Income Risk.  Prior to this Warren William work in Alternative Investments, in Investment Management and as a Buy Side Equity Analyst. Warren William brings a wealth of knowledge and expertise to the table, providing in-depth analysis and commentary on the latest trends in the Stock Markets. Contact information: or Telegram +393339034488

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