What does a Delta of 0.5 indicate about an option?

A Delta of 0.5 signifies that the option's price is expected to change by $0.50 for every $1 change in the price of the underlying asset. Delta is a measure of how much the price of an option is expected to move in relation to a change in the price of the underlying asset. In this case, a Delta of 0.5 indicates a positive correlation, meaning that if the underlying asset increases by $1, the option's price is expected to increase by $0.50. This highlights the sensitivity of the option to changes in the underlying asset's price, reflecting its potential for profit or loss under varying market conditions. Understanding Delta is critical for options traders as it helps gauge the likelihood of exercising the option and aids in risk management strategies.