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"Consider the following 4 options on AAPL: (a) 1-year 25-delta call, (b) 1-year 25-delta put, (c)...

"Consider the following 4 options on AAPL: (a) 1-year 25-delta call, (b) 1-year 25-delta put, (c) 2-year 50-delta call, (d) 2-year 60-delta put. Which of the 4 options has its strike price closest to the strike of a 1-year 75-delta call option on AAPL?"

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Answer #1

Sol:

Call delta values ranges from 0 to 1, while put delta values range from 0 to -1. If you compare the same delta value for call and put options, the call option delta will have the higher strike. Call option with lower delta will have higher strike price and Call option with higher delta will have lower strike price. Therefore 2 year 50 delta call has its strike price closest to the strike of a 1 year 75 delta call option.

Call option with Delta 25 = higher strike

Call option with Delta 50 = Lower strike

Call option with Delta 75 = Lowest strike

Answer is (c)

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