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Q2. The delta of an option refers to the change in the value of an: a....

Q2. The delta of an option refers to the change in the value of an:

a. underlying security for a large unit change in the price of the option

b. option for a large unit change in the price of the underlying security

c. underlying security for a small unit change in the price of the option

d. option for a small unit change in the price of the underlying security

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Answer #1

The correct answer is d. option for a small unit change in the price of the underlying security.

The delta of an option refers to the change in the value of an option for a small unit change in the price of the underlying security.

It is the change in the value of an option price for one unit change in price of the underlying security. For example, if option's delta is 0.3, and the underlying stock price increases by $1, the option price will increase by $0.3 per share.

Option price is impacted by change in price of underlying security not underlying security is impacted by change in the price of the option.

Hope it explains!

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