CFA Practice Question

There are 227 practice questions for this study session.

CFA Practice Question

Which of the following statements is (are) true with respect to option deltas?

I. The sum of the deltas for a long call and a long put that have the same parameters should be equal to zero.
II. The delta for a call is at its highest when the call is at-the-money.
III. For a portfolio to be considered delta-neutral, the fraction of shares that must be bought and sold for each call that is shorted must be equal to the call's delta.
IV. The delta for a short put will always be positive.
A. III and IV
B. II and III
C. I, II, and IV
Explanation: I is incorrect because the sum of the deltas for a long call and a long put that have the same parameters should be equal to one.

II is incorrect because the delta for a call is at its highest when the call is very deep-in-the-money.

User Contributed Comments 5

User Comment
ljamieson Long call, short put with same parameters equals one.
NickNT Agree
ybavly It should be zero since in the money call -delta is 1 and in the money put delta is -1 so they sum to zero
bbadger Same parameters mean same strike price. Long call, short put is a long synthetic future, delta equals one (opposite, delta equals -1). Long both is a straddle, delta equals the difference between the two with that difference increasing the further away you are from At the Money.
somk Ybavly, would you please provide a situation where calls and puts are in the money at the same time?
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