What does the Delta mean on an option contract?

Delta is a theoretical estimate that measures the sensitivity of an option's price to a $1 change in the underlying security's price. It is a Greek letter used in options trading to indicate the direction and magnitude of the price movement of an option in response to changes in the underlying asset.

1. **Direction**: Delta indicates whether an option is bullish (positive delta) or bearish (negative delta). A positive delta suggests that the option will increase in value if the underlying asset's price rises, while a negative delta suggests the opposite.
2. **Magnitude**: The absolute value of delta indicates the percentage change in the option's price for every $1 change in the underlying asset's price. For example, a delta of 0.50 means the option will move by 50% of a $1 change in the underlying's price.
3. **Range**: The delta of a call option is typically between 0.30 and 1.00, while that of a put option is between -1.00 and -0.30. An at-the-money option usually has a delta close to 0.50 or -0.50, and the delta approaches 1.00 or -1.00 as the option moves further in-the-money.
4. **Probability**: The delta of an option can also be used to estimate the probability of the option expiring in-the-money. An option with a delta of 0.50 has a 50% chance of finishing in-the-money, while an option with a delta of 0.90 has a higher probability of finishing in-the-money.

In summary, delta is a valuable tool for understanding the directional risk and potential profit of an options position. It helps traders assess the likelihood of an option finishing in-the-money and the potential percentage change in the option's price given a $1 move in the underlying asset's price.