What is the formula for calculating delta in options trading?

Delta in options trading represents the sensitivity of an option's price to changes in the price of the underlying asset. Specifically, it measures how much the price of the option is expected to change when the price of the underlying asset changes by one unit.

The formula that accurately describes this relationship is the change in option price divided by the change in the underlying asset price. This highlights that delta shows the rate of change of an option's price in response to changes in the underlying asset's price, which is a crucial concept for traders who need to manage risk and make informed decisions in their trading strategies.

Understanding delta helps options traders assess the potential profit or loss from options relative to price movements in the underlying asset, enabling them to make more strategic trading choices. Furthermore, delta values can range from -1 to +1 for puts and calls, respectively, offering insight into the directional risk of the specific option position.