Mark Washington, CFA, is an analyst with BIC. One year ago, BIC analysts predicted that the U.S. equity market would most likely experience a slight downturn and suggested delta-hedging the BIC...

Mark Washington, CFA, is an analyst with BIC. One year ago, BIC analysts predicted that the U.S. equity market would most likely experience a slight downturn and suggested delta-hedging the BIC portfolio. As predicted, the U.S.

equity markets did indeed experience a downturn of approximately 4% over a 12-month period.

However, portfolio performance for BIC was disappointing, lagging its peer group by nearly 10%.

Washington has been told to review the options strategy to determine why the hedged portfolio did not perform as expected.

Washington considers a put option that has a delta of −.65. If the price of the underlying asset decreases by $6, then what is the best estimate of the change in option price?