The value of an option moves on a dollar-for-dollar basis with the price of the underlying asset.

Question

Quizplus · Accepted Answer

The value of an option does not move on a dollar-for-dollar basis with the price of the underlying asset due to the option's delta, which measures the rate of change of the option price with respect to changes in the underlying asset's price. Delta values range between 0 and 1 for calls (0 and -1 for puts), indicating that the option's price moves only a fraction of the underlying asset's price movement.

The Value of an Option Moves on a Dollar-For-Dollar Basis