The delta of a call measures:
A) the change in the ending stock value.
B) the change in the ending option value.
C) the swing in the price of the call relative to the swing in stock price.
D) the ratio of the change in the exercise price to the change in the stock price.
E) None of these.

Question

Quizplus · Accepted Answer

The delta of a call measures the swing in the price of the call relative to the swing in the stock price. It represents the sensitivity of the option price to changes in the underlying asset's price. A delta of 1 indicates that the option price will change by the same amount as the change in the underlying asset's price, while a delta of 0.5 indicates that the option price will change by half as much as the change in the underlying asset's price. Therefore, option traders use delta as a hedging tool to manage the risk associated with changes in the underlying asset's price.

The Delta of a Call Measures