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Underlying Asset - Option Delta
What is currency options delta? The most obvious risk an option trader faces is the movement in the underlying asset (spot exchange rates). The effect this has on an option position depends on the direction and the extent of this movement. Generally, if the book is long of options, any loss experienced is limited. However, if the book is short of options, then losses are potentially unlimited.
Traders must therefore be aware of the sensitivity of the value of each option in their book to movements in the spot exchange rate and this is reflected in the delta of the option.
Delta = Change in option value / Change in underlying asset
A helpful interpretation of "Delta" is that it reflects the probability of exercise; although this is not exactly true, as the delta of some exotic options can be significantly greater than one. In the case of standard options, however, it is a useful interpretation.
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