Delta Analysis
- Thread starter stoic
- Start date
Sure thing...
By "apples and oranges" I meant that you're comparing an instantaneous quantity (analytical delta) that's based on a particular value of a parameter to a realized change in the price of an option over a particular period, during which the value of that all-important parameter may have changed. Is that sufficiently jargon-free for you?
As to the point of BSM, there's an excellent analogy that aaron offered in a thread here: http://www.wilmott.com/messageview.cfm?catid=8&threadid=79606
Well, it's now your turn to enlighten me... What, in your view, constitutes "substance" and which part of my response was lacking in it?
I've seen too many different types of deltas (or sensitivities) related to options. It all depends on the definition of individual delta.
The convntional delta is mainly/merely a hedge ratio, for the practical and important purpose of hedging its UL, simply due to Hedging is the original purpose of options.
You need to specify the definition of your preferred delta (whatever it is called) for further discussion. A chart by itself is not enough, to avoid any misleading.
McMillan:
"The first risk measurement that concerns the option strategist is how much current exposure his option position has as the undrlying security moves. This is called "delta".
In fact, the term delta is commonly used in at least two different contexts: to express the amount by which an option changes for 1-point move in the underlying security, or to describe the equivalent stock position of an entire option portfolio."
"The first risk measurement that concerns the option strategist is how much current exposure his option position has as the undrlying security moves. This is called "delta".
In fact, the term delta is commonly used in at least two different contexts: to express the amount by which an option changes for 1-point move in the underlying security, or to describe the equivalent stock position of an entire option portfolio."