Fahim Shahriyar Dipto
The Option Greek Delta calculates the rate of change in option prices in relation to the value of the underlying assets. The Greeks are more acquainted with options in the stock market. While you are dealing with the share price of a specific company, you have to have a vast knowledge of these options Greeks. You can calculate the option Greek delta in Excel because it is a powerful calculation software. Don’t know how? We have come to save you. In this article, we’re going to show you the steps to calculate the option Greek delta in Excel. Let’s get started.
Download Practice Workbook
Download the following practice workbook. It will help you to realize the topic more clearly.
What Are Option Greeks?
Option Greeks are monetary indicators of how sensitive the price of an option is to the factors that determine it, such as volatility or the value of the underlying asset. The Greeks are used in the subtlety analysis of a value or notebook of options and in the analysis of an options portfolio. Many investors view the metrics as necessary for making wise selections while trading options. There are 5 most commonly used options in Greek. There are also many other options available for Greeks.
| Name | Dependent Variable | Independent Variable |
|---|---|---|
| Delta | Strike Value | Value of Underlying Asset |
| Gamma | Delta | Value of Underlying Asset |
| Vega | Strike Value | Volatility |
| Theta | Strike Value | Time of Maturity |
| Rho | Strike Value | Rate of Interest |
What Is Option Greek Delta?
Delta is a measurement of an option’s value changes in the value of the elemental asset. In other words, the option’s value will change by the itemized amount if the price of the underlying asset rises by a dollar. The formula for the Delta function is:
Here, N is the normal distribution of the price of the share, and the formula for d1 is
Here,
S= Price of Underlying Asset.
K= Strike Price.
σ= Volatility.
r= Risk-Free Factor Rate.
The function is typically calculated as a decimal between -1 and 1. Puts have a value of -1 to 0, while Call options can have a value of 0 to 1. The money value is as deep as, the closer its delta is near 1 or -1.
The complete average of the deltas of all the option values in a portfolio is the portfolio delta function.
Another name for Option Greek Delta is the hedge ratio. A trader can give a barrier to his position by purchasing or selling the number of itemized assets multiplied by the option’s Greek Delta if he knows it.
4 Steps to Calculate Option Greek Delta in Excel
To calculate the options Greek delta, you must follow simple and straightforward steps. After following the instructions, you will be able to easily calculate the delta, which will help you form a clear concept about the investment of money in the stock market.
Not to mention, we have used the Microsoft 365 version. You may use any other version at your convenience.
Step 1: Input the Entity
- First of all, we have to enter all the entity that is related to the calculation.
- We have entered the Strike Price (k), the Time to Maturity (T), and Volatility. Risk-free factor, and Underlying Price of the Asset.
Read More: How to Calculate Delta in Excel (2 Ideal Examples)
Step 2: Calculate the Distribution
- Secondly, go to the C10 cell and insert the below formula.
=(LN(B10/$C$4)+(($F$6+($F$5^2)/2))*$C$5)/($F$5*SQRT($C$5))Here,
B10= Underlying Price of the Asset.
$C$4= Strike Price (k)
$C$5= Time to Maturity (T)
$F$5= Volatility ()
$F$6= Risk-free Rate ®
The LN function calculates the logarithmic value, and the SQRT function returns the square root value of cell C5.
- Eventually, press ENTER and drag down the Fill Handle tool for the other cells.
Finally, you get the distribution value like the image below.
- At this moment, move to cell D10 and insert the formula.
=NORM.DIST(C10,0,1,TRUE)In the above formula, we have used the NORM.DIST function, which returns normal distribution for Mean and Standard deviation. In statistics, this function can be used for a variety of things, including hypothesis testing. The NORM.DIST(C10,0,1, TRUE) syntax returns the normal distribution of the cell C10 where 0 is the mean and 1 is the standard deviation. Here, TRUE stands for cumulative.
Finally, you get the N (d1) value after dragging it down.
Read More: How to Calculate Delta Delta CT in Excel (With Easy Steps)
Step 3: Evaluate the Call Option
The Call options are evaluated as Call Delta= N(d1). As we calculated the N(d1) in the D10:D22, we can easily put the value in E10:E22. As a result, we put the value in the E10 cell as
=D10
Consequently, you get the result after pressing ENTER and dragging it down.
Read More: How to Calculate Delta E Color in Excel (4 Suitable Methods)
Step 4: Estimate the Put Option
The formula for the Put option stands for =N(d1)-1.
So, we move to cell F10 and insert the formula
=E10-1Here, 1 is subtracted from cell E10.
Eventually, hit ENTER and drag the same formula into other cells.
Finally, you get the outcome depicted in the image below.
Read More: How to Calculate Delta Percentage in Excel (4 Easy Methods)
Practice Section
We have provided a practice section on each sheet on the right side for your practice. Please do it by yourself.
Conclusion
That’s all about today’s session. And these are some easy methods to calculate option Greek delta in Excel. Please let us know in the comments section if you have any questions or suggestions. For a better understanding, please download the practice sheet. Visit our website Exceldemy, a one-stop Excel solution provider, to find out diverse kinds of Excel methods. Thanks for your patience in reading this article.
