In clear, well-written English, each of the Greeks is defined and the market terminology employed by practising traders is explained. If the stock price increases by 1 point, a negative delta means the price of the option will decrease by 0. If we have an understanding of how volatile pf underlying product price is, then we have a handle on how exposed our option position is to these price changes. Please enter a valid email. Instead, the option's notional value needs to be adjusted based on the deltas inside the portfolio. If these were puts, the same values would have a negative sign attached to them. A call option delta is between 0 and 1, while a put option delta yewr between -1 and 0.

Sign up to view the full version. Unformatted text preview: You write the put option and delta-hedge it. EXERCISES FOR LESSON 12 You are a market-maker and wrote a European put option. You delta-hedged it with the underlying stock. You are given the following information for the put option and the underlying stock: Stock price Put premium Put delta Day 0 55 1. Use the following information for questions Determine the investment required by the market-maker on day 0, including the option premiums, to sell the bear spread and delta-hedge it.

Determine the investment required on ca,culate 1 to maintain the delta hedge. A market-maker writes a bull spread with calls. Determine the investment required by the market-maker to write this bull spread and delta-hedge it. An investor buys a 1-year futures contract on a stock and delta hedges by buying European put options on yezr futures contract.

You are given: i The 1-year forward price of the stock is After 30 days, the day forward price of the stock is The investor closes the position. An investor bought a European call option with expiry greater than four months on a nondividend paying stock. The investor delta-hedged the purchase by selling stock and borrowing or lending money at the risk-free rate, so that the net cost of the portfolio was Sign up to view the full document.

Ask a Tutor a Question. You write the put option and delta-hedge it. This is the end of the preview. Click z edit the document details. Share this link with a friend:. Most Popular Documents for ACT Study on the go. You write the put option and delta-hedge it. Course Hero is not sponsored or endorsed by any college or university.

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## 2015- CFA L2- Formula Review- Derivatives - Part I (of 3)

The Black-Scholes option -pricing model can be used to compute the price of a put option in light of and then click ' Calculate '. until the option contract. You write the put option and delta-hedge it. Calculate overnight put option. You delta -hedged 1- year futures contract on a stock and delta hedges by. the strike price in a call option and vice versa in a put option. The buyer of the option, of Futures Contract Call Option Traded Futures Contracts.