A put option on the ABC stock, with an exercise price of $60, is selling for $4.00 and the stock price is also $60. The put option has a delta of 0.5. If within a short period of time the stock price increases to $61, what would be the change in the price of the put option?
A) increases by $0.50
B) decreases by $0.50
C) increases by $1.00
D) decreases by $1.00

Question

Quizplus · Accepted Answer

The delta of a put option indicates how much the price of the option is expected to decrease when the stock price increases by $1. With a delta of 0.5, the put option price will decrease by $0.50 if the stock price increases by $1.

A Put Option on the ABC Stock, with an Exercise