A. Call option price goes from $2.05 to $1.85 while the underlying stock price decreases from $40 to $38.

1. What is the value of call Delta?  
2. What is the value of put Delta? 
3. If the price of the stock increases by $1, by approx. how much will call price change? 
4. If the price of the stock increases by $1, by approx. how much will put price change?
5. You have 10,000 shares. How many puts are reqd. to be long to hedge the position?

B. Consider the following option strategy - buy stock at $40 and buy a 38 put for $2 and find out the following:

1. Net cost of position =
2. Breakeven stock price at expiration =
3. Maximum gain =
4. Maximum loss =
5. Profit/loss at stock price of $45 =

C. Consider the following option strategy - buy stock at $40 and sell a 42 call for $1 and find out the following:

1. Net cost of position =
2. Breakeven stock price at expiration =
3. Maximum gain =
4. Maximum loss =
5. Profit/loss at stock price of $55 =

Answer rating: 100% (QA)

A Analyzing Option Greeks and Delta Hedging 1 Call Delta Based on the information provided we cannot determine the exact value of call Delta However w... View the full answer