The current stock price is $50, and a put is priced at $3.59201. If the stock rises to $50.10, the price of the put will be $3.549152 and if the stock drops to $49.90, the price of the put will be $3.635261. What is the best estimate of the delta of the put?
A) $- 0.42858$
B) $- 0.43251$
C) $- 0.43055$
D) Cannot be calculated from the given data.

Question

Quizplus · Accepted Answer

The delta of an option measures the rate of change of the option's price with respect to changes in the underlying asset's price. It can be estimated as the change in the option's price divided by the change in the stock's price. Here, when the stock price increases by $0.10 (from $50 to $50.10), the put price decreases by $0.042849 (from $3.59201 to $3.549152). When the stock price decreases by $0.10 (from $50 to $49.90), the put price increases by $0.043251 (from $3.59201 to $3.635261). Averaging these two changes in put price ($0.042849 and $0.043251) gives an average change of approximately $0.04305 per $0.10 change in stock price, or -0.4305 per $1 change in stock price, which is closest to option C, $- 0.43055$.

The Current Stock Price Is $50, and a Put Is −0.42858- 0.42858−0.42858

The Current Stock Price Is $50, and a Put Is $- 0.42858$