Question

Explain why the delta of an in the money call option RISES over time (i.e. the expiration date approaches) while the delta of an out-of-money call option FALLS over time.

Answer 1

Delta for a call option is always positive in nature because rise in stock price is always positive for call option as it is betting on the upside of the stock.

Delta for put option is always negative in nature because rise in stock prices is always negative for put option as it is betting on the downside of the stock.

The delta for a call option generally hangs in between 0 to 1 and it is always positive in nature while the delta for the put option generally Hanks in negative from 0 to -1.

Delta for in the money option rises even if the expiration approaches because it means is the time remaining for expiration grows lower, the time value of in the money call option evaporates, hence, the delta will increase to compensate that.

Delta for in the money put option will fall even if the expiration approaches because it means that the delta of put option are always ranging between 0 to -1 so they cannot be ranging in positive in any case.