Chapter 05 · Section 5.1
Premium - Price Rise
Now consider the following American option: June 100 XYZ Put .
Current date : February
Current price of XYZ : $102
Current premium : $ 5
Gamma : 0
Delta : -0.40
If the price of XYZ were to increase by $2, the premium will:
a) increase $0.40.
b) increase $0.80.
c) decrease $0.40.
d) decrease $0.80.
A negative delta factor indicates that there is an inverse relationship between the price of the underlying asset and the premium.
The right to sell an asset at Sfr 100 is worth more when the underlying price is Sfr 80 than when it is Sfr 90.