Guide to Forex Options Trading Part 7: Delta and Gamma

The price of options don’t always move in exact correlation to the price of the underlying currency pair, as other factors such as volatility are also priced in. That’s why options traders use a range of terms known as ‘The Greeks’ to classify option positions – namely delta, gamma, vega and theta. Although this may seem a little confusing at first, once understood they can greatly simplify a range of other factors that can affect options pricing.

It’s worth noting that the numbers given for each of the Greeks are strictly theoretical, in that they are projected values based on mathematical models. Much of the information required to trade options, such as the the bid, ask and last prices, volume and open interest, is available from options exchanges and distributed by brokers and data services.

delta-gamma-forexthinkThe Greeks can’t just be looked up on options tables – they need to be calculated, and they are only ever as accurate as the model that is used to calculate them. In order to obtain these values, you need to use a solution that calculates them for you. You can do this using specialised options analysis software, but some brokerages will also provide this information. Of course, you could learn the maths and calculate them yourself, but in most cases this would be too time consuming to be worthwhile.


Delta measures an option value’s theoretical sensitivity to a change in the price of the underlying asset. It is usually a number between minus one and one, and and shows how much the value of an option will should change when the underlying price rises by one unit, such as a dollar. It can also be shown as a value between -100 and +100 to give a more granular representation of the sensitivity.

Call options have positive deltas and put options have negative deltas. As a general rule, at-the-money options tend to have deltas around 50, while deep-in-the-money options would have a delta of 80 or higher and out-of-the-money options have deltas of 20 or less. As the price of the currency pair moves, the delta value will change as the option becomes further in- or out-of-the-money. When an option gets very deep-in-the-money – i.e. a delta near 100,  it will move in close correlation with the underlying price. Conversely, options that are far-out-of-the-money tend not to move much in terms of their premium.



Because delta is such an important factor, a lot can be ascertained by how how much the delta changes when the underlying asset price moves. Gamma measures the rate of change in the delta for each pip increase in the underlying asset. It can be valuable for helping you to predict changes in the delta of an option or the position as a whole. It will be higher for at-the-money options, and lower for the in- and out-of-the-money options. Unlike delta, gamma is always positive for both calls and puts.