- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 34. Valuation of Contingent Claims
- Subject 6. Option Greeks and Implied Volatility

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**CFA Practice Question**

For a put option with a delta of 0.2, a $0.5 increase in the underlying price (current price: $72) will cause the price of the put option to (increase? decrease?) ______ by ______.

Correct Answer: This question itself is wrong. A put option cannot have a positive delta!

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**User Contributed Comments**
5

User |
Comment |
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yly14 |
thank you for the heads up, we'll definitely to looking closely to find WRONG questions at the exam!! |

oluji |
and hope to get credit for finding wrong questions :) |

bmeisner |
The negative is implied, cmon... Quite frequent to hear an OTM put referred to as a 25 delta put. Delta after all is just a measure of the likelihood that the option ends up in the money at expiration. 25% chance of the stock finishing below the strike based on the B-S model. That's quite obvious by the use of the cumulative standard normal probability distribution. It wouldn't make any sense if someone said there's a negative 25% chance of this option ending up in the money. |

bbadger |
Delta has 3 definitions. 1. chance the option expires in the money. 2. hedge ratio. 3. change in option price for a one tick (pip, dollar...) change in the price of the underlying. I never really think of delta as being + or -, though it'll prob be on the test. Also, call hedging is opposite, put is the same (i.e. buy calls, sell futures: buy puts, buy futures) |

birdperson |
(:~ {|) |