What does Taylor Mason mean by predicting delta of a stock? [closed]

What does Taylor Mason mean by predicting delta of a stock? [closed] - Man Wearing White Dress Shirt With Black Necktie

A stock is like a living organism. A sparrow, say. And we are able to create an emergent-based abstraction of that sparrow, which closely approximates the sparrow itself, accounting for migration patterns, wind, weather, and other variables. We can create a similar abstraction of a stock combining the information from the specific ETFs, which represent its underlying dependencies. And if we apply this to the stock we can predict its delta, following the path of its extracted self, because nature follows abstraction.

  • Taylor Mason, Billions S02E10

I tried asking on quant se but no luck. I'm basically wondering if we can always predict a stock's delta. I have a feeling the show might've been just saying a bunch of words to sound smart but then turned out incorrect. The thing is the stock's delta should be either +1 or -1 depending on what position you are, namely, resp, long or short.

Related: Was Rachel Zane talking about a poison pill?



Best Answer

Delta is how much the price of a derivative (such as a stock option) is expected to move relative to a small move in the price of the underlying instrument (such as a stock). It is quoted as a number between -1 and +1.

For example, say a stock is currently priced at 200 pence and option to buy it in 10 days' time (a "call" option) at the same price is at 15 pence. If a rise in the stock's price to 210 pence would cause the option price to rise to 24 pence (the option now being "in the money"), the delta is (24-15)/(210-200) = +0.9. If on the other hand we consider an option to sell it at 200 pence in 10 days' time (a "put" option, which would then be "out of the money"), and if the price of that option might be expected to fall from 15 pence to 6 pence, then its delta would be (6-15)/(210-200) = -0.9.

In the world of financial derivatives, delta is called a "Greek". You can read about delta and other kinds of financial "Greek" (not all of which are named after letters of the Greek alphabet) here: Greeks (finance).

(Note that is not true that delta can only be +1 or -1).

What Taylor Mason or his ghostwriter if he used one probably meant was that taking into account the prices of various derivatives, including some which may be far more "exotic" than simple call and put options, and which have various different expiration dates, you can get the "market view" of the expected graph of the stock price in the time to come, "delta" meaning "change".

Note that when the answerer on quant.se told you that the delta of a stock is always 1, what he meant is that if you take the stock price as its own derivative, then of course its expected change per its expected change is always 1. This information is presumably not what you were asking for, though.




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Taylor's Equations Explained | Billions Season 4




More answers regarding what does Taylor Mason mean by predicting delta of a stock? [closed]

Answer 2

Supplementary to ool:

Upper-case delta (?) often means "change" or "the change in" in mathematics. For example, if the variable "x" stands for the movement of an object, then "?x" means "the change in movement." Scientists use this mathematical meaning of delta often in physics, chemistry, and engineering, and it appears often in word problems.

https://sciencing.com/delta-math-6678201.html

Amount of "change" (difference) is the informal, general meaning in mathematics across many fields.

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