The Delta

What this video covers

• What delta measures: the change in an option's premium for a one-unit change in the underlying futures price
• Why call delta is positive (0 to +1) and put delta is negative (0 to minus 1), and how the sign alone derails half of all delta questions
• How delta behaves by moneyness: deep in-the-money (ITM) approaches 1 in absolute value, at-the-money (ATM) is roughly 0.5, and deep out-of-the-money (OTM) approaches 0
• Why the hedge ratio is dynamic, not fixed, as delta shifts with underlying price moves and time decay
• How to calculate a simple hedge: an option with delta 0.5 behaves like half a futures contract, so two such options offset one futures contract
• The exam gotcha of treating all deltas as positive, and why put delta questions punish that mistake every time