Please help me correct or confirm my intuition about options deltas. My understanding is that delta is the change in an option's price given a $1 change in the option's underlying. Moreover it's common to consider that the option's delta is a rough estimate of the probability that the option will be in the money at expiration. I struggle to understand the value of paying attention to delta when I consider the delta of options on two very different underlyings.
For example, as of this writing the delta for the May-19 TSLA 165 Put is -0.26. I take this to mean that this option's price will decrease by $0.26C should TSLA increase by $1. The delta for the May-05 6EM3 1.09 Put is -0.25 and similarly I take this to mean that this option's price will decrease by $0.25C should the 6EM3 currency future increase by $1. My struggle presents itself because while the TSLA equity moves many dollars in a day, the 6EM3 currency future moves fractions of cents in a day.
- Is my intuition off? If so, please help me correct it.
- How can we compare the deltas of options on different underlyings if delta is in terms of the $1 move of the underlying and different underlyings move very differently?
- Given that the 6EM3 currency future moves fractions of cents in a day, I would think that the likelihood of the option price moving $0.25C is very low since the underlying will almost certainly not move by $1. How do I reconcile this with the idea that delta represents probability?
- Is there an "improved" delta or completely other metric that captures something that can be more easily compared?
- Would normalizing underlyings make this simpler to intuit?