Question By Cary Moore "What Is The Difference Between Beta and Delta?" How are the beta of a stock, and the delta of an option different, and how are the similar? Asked on 13 May 2010 Explosive Options Mentoring Course Find Out How My Students Make Over 40% Profit Per Trade Consistently Through Options Trading In The US Market Even During An Economic Downturn! Answered by Mr. OppiE Hi Cary, Beta of a stock and the delta of an option are similiar in the sense that both beta of a stock and the delta of an option measure the correlation of the movement of one instrument with the movement of another. The beta of a stock measures the correlation of the price movement of the stock with the movement of the overall market. A stock with a beta of 3 is expected to move three times as much as the overall market. However, due to the fact that the beta of a stock is measured over an extremely long period of time, it does not necessarily mean that whenever the market move by 1%, the stock with beta of 3 will move by 3%. This is why beta is taken more as a measure of volatility instead of exact correlation with the market's movement. As such, a stock with beta of 3 is expected to be three times as volatile as the market, which makes it an extremely speculative stock. The delta of an option measures the correlation of the price movement of an option with its underlying stock. An option with delta of 0.5 will move up by $0.50 if its underlying stock move up by $1.00. Unlike beta, delta is a fairly precise measure of how much an option will move with its underlying stock, adjusted for time decay. In fact, the higher the delta value, the more precise the option will move with its underlying stock. However, unlike beta, delta will never exceed 1.0. An option with delta value of 1.0 will move exactly dollar for dollar with its underlying stock and that is the most it can do. Options can never move more than its underlying stock. In conclusion, beta and delta are similiar in the sense that they both measure correlation. However, beta is different from delta in the sense that delta is a fairly precise measure while beta is a more vague measure which measures volatility more than correlation. $29.90 Only! High Yield Covered Call: Finding the Perfect Stocks For Covered Calls Perfect for all Options Traders! Original eBook by Optiontradingpedia.com, the number one online options trading encyclopedia! This eBook Covers: The Secret to looking for the PERFECT stock for Covered Calls The number of ways to write Covered Calls The two ways of measuring Covered Call returns Most Importantly, how to automatically look for high yield Covered Call opportunities to make up to 25% a month! This $29.90 eBook teaches you all these and more! Average Reader Rating : 4.5 / 5 Optiontradingpedia.com is a Masters 'O' Equity company and uses Masters 'O' Equity payment gateway Response by Cary Moore... Reply by Mr. OppiE... Response by Others... Add Your Response Here

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