A stock is currently priced at $90. A put option with a delta of-0.45 has a price of $6.15. If the stock price decreases $0.80, what is the new price of the put?
A) $5.79
B) $6.51
C) $5.35
D) $6.95
E) $6.74

Question

Quizplus · Accepted Answer

First, we need to determine the new stock price after the $0.80 decrease:

$90 - $0.80 = $89.20

Next, we need to determine the new delta of the put option. Since delta is a measure of how much the option price will change for a $1 change in stock price, we can use the delta we were given (-0.45) to determine the new option delta:

-0.45 - 1 = -1.45

This means that for every $1 decrease in stock price, the put option price will decrease by $1.45. Therefore, the new put option price can be calculated as:

$6.15 - ($0.80 x 1.45) = $5.79

So the best choice is B.

A Stock Is Currently Priced at $90