A portfolio has a position delta of 1,250 and a beta of 1.15. If you write calls against it such that the position delta falls to 500, what is the approximate new portfolio beta?
A) 0.46
B) 0.55
C) 1.05
D) 1.15; beta will not change

Question

Quizplus · Accepted Answer

The correct answer is A.The portfolio beta is calculated as the product of the position delta and the underlying beta. If the position delta is reduced by half, the portfolio beta will also be reduced by half. Therefore, the new portfolio beta will be 1.15 * 0.5 = 0.575, which is approximately 0.46.

A Portfolio Has a Position Delta of 1,250 and a Beta