Delta neutral price: where a whole options chain has zero delta
The delta neutral price is the underlying price at which the summed delta of every open contract on a ticker is zero. It is the green line on every ticker page and on the chart, and it is recomputed after every trading day.
Note the difference from the phrase “delta neutral strategy”, which means an individual trader holding a position with zero delta. Here the position is the entire open interest of the ticker, treated as one portfolio.
How it is found
- Every listed contract, all strikes and expiries, with its open interest.
- Implied volatility backed out of each contract’s closing mid price.
- The portfolio’s summed delta at the actual close. Depending on its sign, the model then simulates higher or lower underlying prices, re-pricing the portfolio each time, until the summed delta reaches zero. That price is delta neutral.
Assumptions and their limits are on the methodology page.
What it says
At the delta neutral price the hedging book behind the chain is balanced. Away from it, market makers carry a net delta they hedge with stock, and the direction of that hedge depends on which side of the level the stock sits. For some tickers, especially those with open interest large relative to the float, the level has acted as support or resistance; for others it does not, and the ticker page history shows which is which rather than assuming.
How to read it
- Above or below. Each page states whether the close is above or below delta neutral and by how much.
- Crosses. A close moving across the level is logged as an event and listed on the delta neutral crosses screen.
- Together with gamma max. Gamma max is where the chain’s gamma peaks; delta neutral is where its delta balances. Price between the two is in a corridor bounded by the largest hedging reactions.