Delta of ATM

Quantitative Finance Level 1

The stock is currently trading at $80.

What is the most likely delta of the call at strike $80?

0 -100 100 -50 50

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Calvin Lin by Calvin Lin

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1 solution

Calvin Lin Staff
Feb 15, 2015

The ATM call has a delta that is close to 50.

The deep ITM call has a delta that is close to 100.

The deep OTM call has a delta that is close to 0.

3 Helpful 0 Interesting 0 Brilliant 1 Confused

Isn't the delta of a call bounded by 0,1?

Mayur Bakhai - 5 years, 7 months ago

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Technically yes, though we often multiply by 100 because

  • 1 option = 100 stock
  • it's easier to say "eighty seven" instead of "point eight seven" or "eighty seven hundredths"

Thus, you have to infer from the context.

Calvin Lin Staff - 5 years, 7 months ago

Calvin, the answer should be .5, if you are going to say 50, you should specify that it is 50% as 50 would be infeasible bc of the boundary [0,1] for delta. But huge thanks for helping to author questions, I love brilliant and I hope you all keep expanding the quantitative finance section. I will surely pay if the options section continues to increase! :)

Brandt Lawson - 2 years, 3 months ago

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