Consider a put option with X = $40; r = 0.06; T = 90 days; σ = 0.1; and S₀ = $40. The delta of this put option should be close to ______.

A. 0
B. 1
C. This cannot be determined but it is very sensitive to a change in the underlying price.

Correct Answer: C

The delta of a put option is always negative so B is not correct. When the put option is deep-in-the-money, its delta approaches -1. When the put option is deep-out-of-the-money, its delta approaches 0. As this put option is at-the-money, delta is most sensitive to a change in the underlying price.