Definition
Delta is the option Greek that estimates how much an option's price changes for a one-unit move in the underlying price, holding other factors constant. Call deltas range from 0 to +1 and put deltas from −1 to 0.
How it works
Delta is a per-unit estimate: a call with delta 0.40 gains about HK$0.40 if the underlying rises HK$1, while a put with delta −0.40 loses about HK$0.40. Delta approaches ±1 as an option goes deeper in the money and approaches 0 when far out of the money; at the money it is roughly ±0.5.
Multiplying delta by the contract multiplier and number of contracts gives position delta, the equivalent share exposure. Delta itself changes as price, time and volatility change. Traders sometimes read it as a rough chance of finishing in the money, but that is only a heuristic.
Formula / convention
Delta ≈ Change in option price ÷ Change in underlying price; Position delta = Option delta × Multiplier × Number of contracts
Illustrative example
A fictional call has a delta of +0.40 on Sample Co shares, and a trader holds 5 contracts of 1,000 shares each. Position delta is 0.40 × 1,000 × 5 = 2,000 share-equivalents, so a HK$1 rise in the share price changes the position's value by about HK$2,000. Because delta itself shifts as the price moves, the estimate is reliable only for small moves.
What to watch for
Delta is a local estimate that keeps changing, so large price moves, passing time or shifts in volatility can make the actual change differ from the delta-based figure; it is not an exact probability.