Chartered Financial Analyst Level 2

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Explanation:

Explanation

For out-of-the-money (OTM) put options as expiration approaches:

Delta measures the sensitivity of the option price to changes in the underlying stock price
For OTM put options: The option is out-of-the-money, meaning the strike price is below the current stock price
As expiration approaches: The probability of the option expiring in-the-money decreases significantly
Delta approaches 0: Since the option is unlikely to be exercised, its price becomes less sensitive to stock price movements

If the options were in-the-money put options, delta would approach -1. For at-the-money options, delta would approach -0.5.

Explanation:

For out-of-the-money (OTM) put options as expiration approaches:

Delta measures the sensitivity of the option price to changes in the underlying stock price
For OTM put options: The option is out-of-the-money, meaning the strike price is below the current stock price
As expiration approaches: The probability of the option expiring in-the-money decreases significantly
Delta approaches 0: Since the option is unlikely to be exercised, its price becomes less sensitive to stock price movements

If the options were in-the-money put options, delta would approach -1. For at-the-money options, delta would approach -0.5.

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