Option Greek Delta measures how much the possibility of movement in connection with changes in underlying stock prices. This is the factor which shows the changes in the price of the underlying asset.
The Delta of the option
For example, if an investor buys a call option call Delta of 0.50, this means that if the growth in the share price of $1, with all other things being equal, the value of the option will get 0.50$.
The Delta of an option can vary from 0 to 1. The Delta of a put option can range from -1 to 0. Whenever an investor buys a call, they have long deltas. On the other hand, when the investor buys puts, they are short Delta.
What is Straddle?
Apart is option strategy consisting of the purchase or sale of call options and put at the same strike price and expiration date. When traders buy apart, they do not make a directional bet. Instead, they are betting on volatility.
More specifically, the trader believes that option is very cheap. On the other hand, a trader who sells a straddle sees fit are overpriced, and do not have a directional bias on the stock price.
The Delta-Neutral Position?
Delta-neutral position is a position that is created with positive and negative deltas that don’t pay off – to create a position that has a Delta of zero.
For example, assume that a trader buys an in the money $100 calls and simultaneously buys at the money puts $100. As a result, the position of the trader is already long $100 straddle. As a rule, money makes the Delta is 0.5, and in the money puts have a Delta of -0.5. If both options are purchased, the deltas cancel each other out to make it Delta-neutral position.