A Put Option on the ABC Stock, with an Exercise

question 49

Multiple Choice

A put option on the ABC stock, with an exercise price of $60, is selling for $4.00 and the stock price is also $60. The put option has a delta of 0.5. If within a short period of time the stock price increases to $61, what would be the change in the price of the put option?

• A) increases by $0.50
• B) decreases by $0.50
• C) increases by $1.00
• D) decreases by $1.00

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Definitions:

Competitive Firms

Businesses operating in a market where they compete with others for customers, each with minimal influence over market prices.

Monopolies

Market situations in which a single supplier dominates the supply of a good or service, with no close substitutes.

Demand Curve

An illustrated chart depicting the correlation between a product's price and the amount of it consumers want to buy at that price level.

Marginal Cost

The spending necessary to produce an extra unit of a product or service.