I use this site
bigcharts.marketwatch.com click "Options Chain"
and RBC Direct Investing, to follow my options.
You sent me to this site and I keyed in SA insidestocks.com
I cannot find the delta on any of the three sites above. Is this something I must calculate myself?
The underlying stock is Seabridge Z.SA Closed at $29.24
The Jan $50 call closed up $0.05 at $0.55
SAA221150.00
Trying to learn a little more about Delta on line yet it still doesn't make it easy, I'm not going to attempt the formula below.
Am I over my head here trying to buy calls and puts without the analysis you use?
Bottom line as I understand it.... use leverage as a key criteria for choosing your calls or puts.
I've been trading stocks for a few decades and thanks to an online acquaintance have now dipped my toe into the sea of options.
a) Delta
> If the price of the stock rises, the call option premium will tend to rise and the put option
premium will decrease, all else being equal. However, the prices for all options will not increase
or decrease at the same rate.
Delta, D, is the fourth letter of the Greek alphabet, and generally thought of as the most important
“Greek” for the measure of hedging sensitivity. Delta is the change in option price for a small
change in the underlying stock price, assuming that all of the other option pricing variables remain
constant.
Æ =
ct – co =
rate of change of option price
St – So rate of change of stock price
Where: co is the original option price
ct is the price of the option after the price of the underlying changes to St
So is the original price of the underlying
St is the new price of the underlying
As the above equation indicates, delta estimates how much the option price will change if the
value of the underlying changes.
Example :
Suppose a stock, XYZ is currently trading at $36.00. The XYZ September 37.50 call options are
valued at $2.65 and have a delta of 0.47. A $1.00 (one unit) increase in the price of XYZ will
increase the option premium by $0.47.
For call options, delta is a positive value in the range (0; +1); for put options, delta is negative and in
the range (–1; 0). For in-the-money options, delta tends toward +1 for a call and –1 for a put. At-themoney
options have a delta of ±0.50. Lastly, out-of-the-money options have a delta that nears zero.
17
> Delta as a hedge ratio
Delta has one other interpretation that is very important for professional option traders, or for
investors who are using options to hedge their portfolio value. This second interpretation is that
delta is the hedge ratio for creating a riskless portfolio.
It is this interpretation of delta that we used when working backward through the binomial
option tree. You may recall that the trader who sold a call option could create a riskless portfolio
over the next period by simultaneously buying D shares of the underlying stock. At each node of
the binomial pricing tree, an option trader would calculate the delta for the next period, and then
buy D shares of stock to make sure that he was hedged over the next period.
Example :
An investor holds 600 shares of ABC trading at $50.00. The ABC 50 put options have a delta of –0.50.
To calculate the number of put options to buy for a delta-hedge, the investor must divide the
number of shares by the delta. Then, he must divide the result by 100. In our example, the investor
must buy: 600 ÷ 100 = 12 options |
