Delta Neutral Options Trading Strategy

#11
Calculating Delta is very simple. You just need to know the result of Black Scholes Model for Option Pricing Model. And Delta is just first derivative of Call and Put function.

Delta of Call = N(d1) [Its always positive becoz N(d1) is a probabilistic cumulative normal distribution function. ]

PS: Don't worry if you don't understand normal distribution function. Just remember that its value ranges from 0 to 1. Hence N(d1) is always positive. Which implies that if price of an underlying asset increases then Price of Call option will also increase.

Similarly,
Delta of Put = N(d1) - 1 < 0

Where d1: ( ln(S/X) + (R + σ^2/2)T )/ σ * sqrt(T)
S: Current Asset Price
X: Strike Price
R: Risk Free Rate
σ: Volatility
T: Days(in years) to expire
 

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