The risk indicators of options are usually expressed in Greek letters, including delta value, gamma value, theta value, vega value, rho value and so on. Delta value (δ), also known as hedging value, is a measure of the range of option price change when the underlying asset price changes. Expressed by the formula: Delta= option price change/spot price change of the underlying asset.
The Delta value of the call option is positive (ranging from 0 to+1), because when the stock price rises, the price of the call option will also rise. The Delta value of put option is negative (the range is-1 and 0), because when the stock price rises, the price of put option will fall. The Delta value of the equivalent call option will be close to 0.5, while the Delta value of the equivalent put option will be close to -0.5.
For example, the Delta value of HSBC Holdings' (005) 150 yuan call option is equal to 0.5 yuan, which means that when HSBC Holdings' share price rises by 1 yuan, the call option price will rise by 0.5 yuan. Similarly, if the Delta value of an HSBC put option is -0.4, it means that when the price of HSBC Holdings rises by 1 yuan, the option premium will fall by 0.4 yuan. However, investors should also pay attention to the fact that the Delta value of the option will change with the drastic change of the stock price, and the change rate of the expected influence of the Delta value on the option premium is only applicable when the stock price changes slightly. Therefore, when the stock price changes greatly, the Delta value should not be used to predict the change of option price. When the option manufacturer provides liquidity in the market (that is, he is responsible for providing the purchase price of an option series), if there are buyers and sellers in the market, he will hold positions in the contract. For example, if an opponent buys a call option contract from him, it means that he holds a short position in the call option. However, because his purpose as a banker is not to gamble with his opponent, he needs to hedge his position. At this time, he has to decide how many stocks he needs to buy (because the risk of holding a short position is that the stock price will rise) to hedge, and Delta is one of the risk variables that help him calculate the number of stocks to hedge.