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Delta One definition
Delta One is a class of financial product whose price moves almost one-for-one with an underlying asset, index, basket, or security. The name comes from delta, the measure of how much a product's price changes when the underlying moves.
A Delta One product has a delta close to 1.0, so it is expected to rise or fall in step with the underlying. If the underlying gains 1%, the product gains roughly 1%, before costs, tracking differences, or financing effects. Common examples include exchange-traded funds, futures, forwards, total return swaps, index swaps, certificates, and custom baskets.
Delta One products differ from options because their exposure is direct and linear, with none of the option's curved payoff. An option's delta shifts as the underlying and time change, while a Delta One product holds its delta near 1 throughout, which is why it tracks the market rather than betting on a strike.
Delta One Example
You want exposure to the S&P 500 Index without buying every stock in the index one by one, so you buy an exchange-traded fund that tracks the index.
If the S&P 500 rises by 1%, the ETF rises by about 1%, before fees and tracking difference. If the S&P 500 falls by 1%, the ETF falls by about 1%.
This is Delta One exposure because the product moves almost in line with the underlying index.
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