If you have a 1wk USDJPY Jpy put 109.90 strike with spot 108.70 and vol 13.85 it gives a delta of about +27%What does that delta actually mean ? And how will it move with the strike ?And why is a 108.60 strike with spot 108.72 a 50% delta ? should it not be over 50% or is that because there is still a week for the option to run ?Also what does it mean when puts are + delta and calls are - delta ?I know this is very basic stuff but just trying to get my head around it so all help appreciated - thanks

QuoteIf you have a 1wk USDJPY Jpy put 109.90 strike with spot 108.70 and vol 13.85 it gives a delta of about +27%the delta is how much of the underlying you need to hedge the option - in this case if you are short the 109.9 JPY put then you have to sell 27% of the yen notional and buy USD with the spot at 108.7. The delta moves as the option gets in the money - so if the Yen drops to 120 agst USD then you will need to sell about 100% of the notional for the same strike as with 7 days to go. QuoteAnd why is a 108.60 strike with spot 108.72 a 50% delta ? should it not be over 50% or is that because there is still a week for the option to run ?I think this is because the 1wk forward is around 108.6 as USD rates are higher than JPY rates therefore your hedge earns you the carry and that is reflected in the forward price. btw options struck ATM forward are not neccessarily 50% deltahth

QuoteOriginally posted by: daveangelQuoteIf you have a 1wk USDJPY Jpy put 109.90 strike with spot 108.70 and vol 13.85 it gives a delta of about +27%the delta is how much of the underlying you need to hedge the option - in this case if you are short the 109.9 JPY put then you have to sell 27% of the yen notional and buy USD with the spot at 108.7. The delta moves as the option gets in the money - so if the Yen drops to 120 agst USD then you will need to sell about 100% of the notional for the same strike as with 7 days to go. So how come on some exotic options you can have a delta of +419 ? And what does it mean when it is a negative delta ?

I am afraid the delta is still the delta not matter how big or small.negative delta means your hedge goes the other way - in the case of the USD call/yen put if you were long of the option then your hedge is other way. Or for example, if you were short the 105 Yen call/$ put then that would have a negative delta to the fx rate ...

Thats great - thanks for your help mate