What does option delta measure?

Option delta specifically measures how much the price of an option is expected to change when there is a one-unit change in the price of the underlying asset. It provides insight into the price sensitivity of the option relative to movements in the asset’s price. This metric is particularly useful for traders and investors as it helps them to understand how an option's value will fluctuate as the underlying asset's price rises or falls.

In this context, delta ranges from 0 to 1 for call options and 0 to -1 for put options. A delta of 0.5, for instance, implies that if the underlying asset increases in price by $1, the price of the call option would increase by approximately $0.50. This relationship illustrates the direct impact that changes in the underlying asset's price have on the pricing of options, which is essential for effective hedging strategies and risk management.

The other options do provide relevant concepts in options trading, but they do not directly address what delta measures. For example, one option refers to the sensitivity of the underlying asset price without linking it to the pricing of the option itself. Others mention probabilities and the time value of options, which are important aspects of options pricing but are distinct from delta's function as a