Lesson #1: What are Options? / Lesson #2: How options are priced / Lesson #3: Calls and Puts / Lesson #4: How options increase in value / Lesson #5: Times and Options / Lesson #6: Strike Price / Lesson #7: In, At and Out of the Money / Lesson #8: Option Risks / Lesson #9: Writing Options

The Delta is the rate by which the option increases or decreases in value for every dollar movement in the underlying stock. The deltas generally range from 0.00 to 100. A delta of 20 tells you that a one dollar move in the price of the stock would result in an increase or decrease of 20 cents in the price of the option.

If the stock increased in price by 50 cents, the price of the option would go up by 10 cents.

Delta is a measure of the sensitivity the option value.

It is important to realize that when you buy an option with an initial Delta of say 20, it does not mean that the Delta will stay the same for the life of your option.

The Deltas can fluctuate and will increase if there is a significant movement in the price of the underlying stock. If you bought a call option hoping the stock would increase in value, and the stock suddenly jumps in price by $5.00, the delta will increase as well, sometimes going as high as 100, meaning that for every dollar increase in the stock, your option increases in value by 1.00.

If you bought the option at the money or in the money for $2.50 and the stock increased in value by $5.00, your option could conceivably be worth between $7 and $8, translating into a possible 500% return on your investment.

Obviously, you want to buy a option with a high delta to realize the greatest return. Note: you can increase your delta by buying an option that is in the money. However, at the same time you are putting more money at risk should the option expire worthless.

The reverse, of course, is true for Put options where you bought the option hoping the stock would decrease in value. Your option will increase in price in proportion to the drop in value of the underlying stock. The Delta will increase if their is a significant drop in the price.