Cryptocurrency Q&A
Can the delta of an option be greater than 1?
Can the delta of an option be greater than 1?
emma_grayson_journalist
Sat Oct 05 2024
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7 answers
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Can someone explain to me why the delta of an option might potentially exceed the value of 1? I've heard this term being discussed in the context of cryptocurrency trading and I'm curious to understand the underlying concept behind it. As I understand, delta is a measure of how sensitive an option's price is to changes in the underlying asset's price, so it's surprising to me that it could ever exceed 1. Could someone elaborate on this and provide some real-world examples or scenarios where this might occur?
7 answers
EthereumEagleGuard
Mon Oct 07 2024
The concept of delta in options trading is crucial for understanding the relationship between the option's price and the underlying asset's price.
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Michele
Mon Oct 07 2024
When the delta value is 1, it indicates that the option's price is moving in perfect sync with the underlying asset's price.
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Michele
Mon Oct 07 2024
This scenario is considered acceptable as it aligns with the fundamental principle of options trading.
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EthereumEliteGuard
Mon Oct 07 2024
However, a delta value exceeding 1 does not make logical sense, as it implies that the option's price is moving faster than the underlying asset's price.
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GinsengBoost
Sun Oct 06 2024
To prevent such an illogical scenario, the delta of an option is capped at a maximum value of 1 or 100, depending on the scale used.
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