- 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**

Consider a put option with X = $40; r = 0.06; T = 90 days; σ = 0.1; and S

B. 1

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

_{0}= $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.

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