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Deep-In-The-Money Elasticity


The elasticity of an option where its value increases (for a call) and decreases (for a put) one-for-one with the underlying price. As such, it delta is one. For example, a call option with a strike price of 100, while its underlying is currently trading at 130, will have its delta equal to or approaching one (unity). A similar situation may be observed when a put option has a strike price of 100, while its underlying is currently trading at 70. In both cases, the option’s elasticity is said to be deep in the money.

It is sometimes known by its abbreviated form: DITM elasticity.


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