Heraclitus, a Greek philosopher, was quoted as saying "change is the only constant in life." It’s something we say in all kinds of situations - to comfort those experiencing the pain of change due to loss, or as an expression of awe, even joy, when life’s grand wonders happen upon us. Sometimes these events intertwine in the bittersweetness of life, which is captured in the statement’s temper.
The Greek letter Delta is the universal symbol of change. Delta is the difference between two variables, often when a catalyst is introduced or while a change is taking place. Delta is present in algebra, geometry, chemistry, physics, music, and even, philosophy. The Delta variant of COVID-19 has wrought the change its name portends and continues to upend the world, unfortunately.
Delta has long been linked with finance and investing. On Wall St., Delta is the ratio that compares the change in the price of a stock to the corresponding change in its derivative, a stock option. “What’s the Delta on that option?” (meaning - what’s the price of that option going to do when the stock moves?), is a question one would hear all day on a trading floor. Companies and their bankers constantly use Delta when considering a merger, acquisition or using more leverage.
People use Delta when discussing all manner of financial questions too. When refinancing a mortgage, making retirement plan contributions (taxes!) or simply watching their portfolios, it’s all about the Delta. Over one day, one month, one year, ten years and beyond.
Delta, and not just the COVID variety, can make people uneasy as change can be difficult. As financial planners, we often find ourselves present at the crossroads of a Delta event for our clients. In making life moves like marriage, homes, children, retirement – quantifying the Delta of decisions is a useful way to understand what the future may look like. It can also relieve anxiety about the impact of those decisions by knowing the realm of possibilities from the best-case scenario to the worst. Sometimes, the Delta of a decision may be smaller than it first appears, as all equations have two sides.
A good options trader always knows their upside and downside regardless of whether their stock moves up or down. Our goal, and role, is to help you make the most of your financial options (however, don’t expect to see any stock options in your portfolio!).
While change is often feared and resisted, a quote by the American Founding Father Benjamin Franklin directs us to roll with it. He said: “when you are finished changing, you are finished.”
Have a great Autumn and please contact us with any changes to your financial picture or just to chat.
Scott Lasky, CFP™
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