Chapter 05 · Section 5.1

Premium -Price Fall

Consider the same 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 decrease by $2, the premium will:

b) increase $0.80.
Yes. A decrease in the value of the underlying asset makes a put option more valuable, causing the premium to go up. Continue
c) decrease $0.40.
d) decrease $0.80.

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