The values are theoretical because it is market supply and demand that ultimately determines prices. While trading with a mid-high frequency, leverage is kept low, which provides safety for your investment. For example, if a portfolio of 100 American call options on XYZ each have a delta of 0.25 (=25%), it will gain or lose value just like 25 shares of XYZ as the price changes for small price movements. In our formula above, the delta in this situation would be ($2.5 - $2) / ($31 - forex rho $30) = .5 Conversely, let's say you owned a put at $2.00 and the stock moved higher by one point which resulted in the put option decreasing in value by $.5. The option premium consists of a time value that continuously declines as time to expiration nears, with most of the decline occurring near expiration.
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