The delta value of a derivative or a position multiplied by the notional principal. It is the delta hedge of a derivative position expressed in dollars. This tool measures the dollar value change for a one-percent change in the price of the underlying contract:
$delta= (contract size x point value)/ 100
Dollar delta can help investors determine their exposures to a market move in either direction. To that end, an investor sums the delta for each asset and then multiply the delta by the asset price. Then, all dollar deltas are added together. For example, consider a portfolio of two shares of stock, company ABC and company XYZ:
| ABC | XYZ | |
|---|---|---|
| Delta position | 100 delta | – 100 delta |
| Share price | $100 | $5 |
Sum= (100 x 100) + (-100 x 5) = +9500 $delta
This indicates that this portfolio is long, not neutral.
