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:
a) increase $0.40.
b) increase $0.80.
c) decrease $0.40.
d) decrease $0.80.
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.
A negative delta factor indicates that there is an inverse relationship between the price of the underlying asset and the premium.