How to calculate delta.

1. Go to optionseducation.com look up the Micron MU short put, Nov short put. Select a strike down 15% from the stock. Using delta, gamma, and theta assume the stock rises by 2% in three days. Calculate the $ profit and ROI.
2. An equity portfolio is worth $100 million with a 1.3 beta. S & P 500 index futures are trading at 3,398 (multiplier 250, beta 1.00). You wish to synthetically decrease the beta to -1.00. You simulate a drop in the market by 1.50%. Calculate the # of contracts and do a proof.
3. Explain the following option strategies: covered call, protective put, long and short straddle.
4. Explain the difference in calculating the profit of the short straddle using a.) options algebra and b.) the 3 Greeks (delta, gamma, theta).
5. Explain how to calculate delta.
6. Explain in terms of slope and calculus the meaning of delta.
7. Explain the analogy of delta to duration.
8. Explain the long call and long put delta range.
9. Explain the absolute value of the sum of the straddle delta (position delta).

Sample Solution