# Measuring Directional Exposure with Delta: Single Option and Option Spreads

## Delta as a measure of directional exposure

The relationship between the underlying stock’s price changes and the option’s price changes is measured by the well known Greek letter delta. In general, delta measures by how much the value (market price) of an option or an option spread position changes when the market price of the underlying asset (e.g. a stock) changes by 1 dollar. You can see a more detailed introduction to delta here: Option Delta.

Besides individual options, delta can be used to measure the directional exposure of whole option spreads or other positions combining multiple options on the same underlying asset.

## Delta of call options

For call options delta can reach values from zero (far out of the money options) to one (deep in the money options). At the money options have delta around 0.50. This means that when the underlying stock increases by 1 dollar, the option’s market price rises by 50 cents.

## Delta of put options

For put options delta has values between negative one (deep in the money puts) and zero (far out of the money puts). At the money put options have delta around -0.50. When the underlying stock decreases by 1 dollar, the put option’s market price rises by 50 cents (same as with calls, just inverse).

## Measuring directional exposure of option spreads

Options’ delta is additive and therefore it is an effective tool for measuring directional exposure also for more complicated option spreads and combinations of multiple options. You simply add all deltas of your long options and subtract all deltas of your short options and the result is the total delta of your position. You can see an example here: Delta Hedging.

## Bullish and bearish option spreads and delta

If the total delta is positive, you have bullish exposure to the underlying asset (you make a profit when the price of the underlying asset rises). If it is negative, you are bearish (you profit from decline of the underlying asset’s price). Unlike the delta of a single option, the total delta can be higher than one or lower than minus one for combinations of multiple options.

## Related pages

how to calculate the coefficient of skewnessacceptable skewness and kurtosis valuesexcel formula for average percentagetrue standard deviation formulaipath vixwhat is a straddle in optionss&p etf shortannualized standard deviation of monthly returnsskewness examplepearson coefficient excelvix chicagohow to use the normdist function in excelmeasure of skewnesscboe options chaincalculating implied volatilitymeasure of skewness and kurtosishow to calculate the coefficient of variation in excelhow many shares in one option contractkurtosis exampleinverse etfs listarithmetic made easycftc cot datastock covariance calculatorvix futures term structureshort straddle positionannualization calculatorrumus delta toption payoff calculatorvix quotelong short etfrules for multiplying square rootsvix trading strategydemerits of meanformula sharpe ratiospx futures bloombergmeaning of kurtosismarket value weighted index formulaexcel macro averageyahoo market indicescharacteristics of a hedge fundderivation of variance formulastrike price exercise priceblack-scholes valuation modelarithmetic median formulacalculating historical volatilitybull put spreadssharpe ratio optimal portfoliofifo and weighted averageblack scholes original paperhow to calculate volatility for black scholescalculate stdevcboe vix optionsoption delta calculatoroptions straddle strategyetf vxxcalculating volatility for black scholeshow to calculate thetageometric averagesoptions futures and other derivatives solutionsmini vix futurespopulation mean equationrsi indicator pdfcot cftccboe expiration calendaroption greeks formulaimplied volatility black scholesannualized volatility formulaskewness coefficientaverage real return formulaproshares ultra vix short-term futures etfstandard deviation formula on excellogarithms in excelarithmetic mean calculatoroption delta calculationrsi indicator interpretationvega calculatorfxa etfvariance function in excel