What does "Delta" measure in options trading?

Delta is a crucial concept in options trading that quantifies the sensitivity of an option's price to changes in the price of the underlying asset. Specifically, it measures how much the price of an option is expected to move for a $1 change in the price of the underlying asset. If the Delta of a call option is 0.5, for example, this indicates that for every $1 increase in the price of the underlying asset, the price of the call option would increase by approximately $0.50.

Understanding Delta is vital for traders since it helps in assessing the potential risk and reward of a trading position. It provides insights not just into price sensitivity but also indicates the probability of an option finishing in-the-money at expiration. Therefore, recognizing Delta as the measure of an option's sensitivity to changes in the underlying asset's price is essential for effective options trading strategies.

In contrast, other options such as time decay or expected returns pertain to different risk factors and metrics in trading, but they do not describe the direct relationship between an option’s price movement and the underlying asset’s market behavior as Delta does.