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+O.,ter 16: Put Option Buying 261 
+changes even on a fractional move in the underlying stock, but one generally assumes 
+that it will hold true for a 1-point move. Obviously, put options have deltas as well. The 
+delta of a put is a negative number, reflecting the fact that the put price and the stock 
+price are inversely related. As an approximation, one could say that the delta of the 
+ctill option minus the delta of the put option with the same terms is equal to 1. That is, 
+Delta of put = Delta of call - 1. 
+This is an approximation and is accurate unless the put is deeply in-the-money. It has 
+already been pointed out that the time value premium behavior of puts and calls is 
+different, so it is inaccurate to assume that this formula holds true exactly for all 
+cases. 
+The delta of a put ranges between O and minus 1. If a July 50 put has a delta of 
+-½, and the underlying stock rises by 1 point, the put will lose ½ point. The delta of 
+a deeply out-of-the-money put is close to zero. The put's delta would decrease slow­
+ly at first as the stock declined in value, then would begin to decrease much more 
+rapidly as the stock fell through the striking price, and would reach a value of minus 
+1 (the minimum) as the stock fell only moderately below the striking price. This is 
+reflective of the fact that an out-of-the-money put tends to hold time premium quite 
+well and an in-the-money put comes to parity rather quickly. 
+RANKING PROSPECTIVE PUT PURCHASES 
+In Chapter 3, a method of ranking prospective call purchases was developed that 
+encompassed certain factors, such as the volatility of the underlying stock and the 
+expected holding period of the purchased option. The same sort of analysis should be 
+applied to put option purchases. 
+The steps are summarized below. The reader may refer to the section titled 
+"Advanced Selection Criteria" in Chapter 3 for a more detailed description of why 
+this method of ranking is superior. 
+1. Assume that each underlying stock can decrease in price in accordance with its 
+volatility over a fixed holding period (30, 60, or 90 days). 
+2. Estimate the put option prices after the decrease. 
+3. Rank all potential put purchases by the highest reward opportunity for aggressive 
+purchases. 
+4. Estimate how much would be lost if the underlying stock instead rose in accor­
+dance with its volatility, and rank all potential put purchases by best risk/reward 
+ratio for a more conservative list of put purchases.