Relationship between Delta, Options and Futures

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Learn the intricate relationship between Delta, Option and Future


"Relationship between Delta, Options and Futures Investors spend a lot of time thinking of ways that they can mitigate risk while still earning money. Are you wondering how do they do it? For that let's understand a few things: Option Greeks measure how the option value changes in various variables like market price, interest rates, volatility and time to expiry. As we learned in the previous module, A futures contract allows you to buy or sell an underlying stock or index at a preset price for delivery on a future date. 

Options are of two types -- call and put. A call option gives a buyer the right to purchase an underlying stock or index at a preset price during a contract’s liquid life -- a month or also week in case of Bank Nifty. Delta is an Option Greek that captures the effect of the direction of the market. Call option delta varies between 0 and 1, some traders prefer to use 0 to 100.
Put option delta varies between -1 and 0 (-100 to 0)
The delta of a futures contract is 1.00. Delta changes over a period of time. It depends on factors like volatility, interest rates and time to maturity. To help you understand more about Option Greeks, read about Using Options Greek on Smart Money by Angel Broking."

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