If the hedge ratio for a stock call is 0.30, the hedge ratio for a put with the same expiration date and exercise price as the call would be
A) 0.70.
B) 0.30.
C) −0.70.
D) −0.30.
E) −0.17.

Question

Quizplus · Accepted Answer

The hedge ratio (or delta) for a put option can be found by subtracting the hedge ratio of a call option from 1. Therefore, if the hedge ratio for a call is 0.30, the hedge ratio for a put with the same expiration date and exercise price would be 1 - 0.30 = 0.70. However, because put options have an inverse relationship with their underlying asset, the correct answer is -0.70.

If the Hedge Ratio for a Stock Call Is 0