Delta & Risk Level
๏ปฟDelta measures the sensitivity of an option's price to a $1 change in the price of its underlying asset. An option's delta is the probability that it will finish in the money. The higher the delta, the riskier the vault.
Let's assume we have a call option priced at $1.00 with a delta of 0.50. This means that for every change in the price of the underlying asset, the option's price will change by 50% of that amount.
In this scenario, the price of the underlying asset increased from $96 to $97.5, which is a $1.5 move. Consequently, the option's premium will increase by 50% of this $1.5 change, which is $0.75 ($1.5 * 50% = $0.75). Therefore, the new price of the option will be $1.75.
It's important to note that
- Call options always have a positive delta between 0 and 1.00, while put options always have a negative delta between 0 and -1.00.
- Being long a call results in positive delta, while being short a call results in negative delta. Conversely, being long a put results in negative delta, and being short a put results in positive delta.
Traders typically refer to delta without the decimal point, so a delta of 0.50 is commonly called a 50 delta.
The absolute value of delta also indicates the approximate probability that the option will finish in the money. For example, a delta of 20 suggests a 20% chance of finishing in the money, while a delta of 50 suggests a 50-50 chance.
Delta is dynamic and changes with movements in the underlying asset. Options with a delta less than 50 are considered out of the money. If the delta is greater than 50, the option is in the money. A delta close to 50 indicates the option is at the money.
Strategy | Risk Level | Delta at Auction |
๏ปฟCovered Call (Capped Call) | Conservative | 10 |
๏ปฟ | Moderate | 25 30 exclusive for: - SUI Daily 3x Covered Call (Capped Call) |
๏ปฟ | Aggressive | 45 |
๏ปฟCall Selling๏ปฟ | Conservative | 10 |
๏ปฟ | Moderate | 25 |
๏ปฟPut Selling (Capped Put) | Conservative | 10 |
๏ปฟ | Moderate | 25 30 exclusive for: - SUI Daily 3x Put Selling (Capped Put) |
๏ปฟ | Aggressive | 45 |
๏ปฟCall Spread๏ปฟ | Moderate | 10-25 |
๏ปฟ | Aggressive | 25-45 |
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