- CFA Exams
- CFA Level I Exam
- Study Session 14. Derivatives
- Reading 38. Valuation of Contingent Claims
- Subject 6. Option Greeks and Implied Volatility

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**CFA Practice Question**

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

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.

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.

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**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? |