Example: Portfolio insurance 173Suppose a portfolio has a value of $100.
Suppose a put option with exercise price (strike price) of $100 has a sensitivity (delta) to changes in the value of the portfolio of -0.6. In other words, the option’s value swings $0.60 for every dollar change in portfolio value, but in an opposite direction.
Suppose the stock price falls by 2%.
What is the profit/loss on the portfolio that includes the put?
Derivative securities: Options - Introduction