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Strategies & Market Trends : Canadian Options
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To: Clark Kent who wrote (1587)7/10/2010 9:49:45 AM
From: tyc:>   of 1598
 
>>"I'm obviously not calculating the Delta correctly".

Stick with it ! Understanding Delta is essential to the understanding of options.

Calls that are a long way "out of the money" will have a very low delta.... they hardly respond to movements in the price of the underlying. Calls that are deep (in the money) have the maximum 100% delta... they respond to movement in the underlying common stock 1:1. At the money, i.e. at the strike price, a call will have a delta of about 50%. When I bought my RIM calls they were out of the money and therefore had a delta below 50%.

I use the term "delta value". If a call has a delta of 38% and the underlying common is priced at $51, in my eyes the call has a "delta value" of 38% of $51 or $19.38. If its market price is only $1.60 obviously it is cheap, especially if the stock is volatile.
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