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1. Decline in stock prices Call premium would increase. The owner of the call will receive a larger margin when they exercise the call and sell the stock at the new higher price. Put premium would decrease. The owner of the put will receive a smaller margin when they exercise the put in comparison with selling the stock to market. Increase in stock price volatility Call and put premiums would increase. Increase in volatility means the stock prices are more likely to have large gains or large losses. The owner of the call gets a high margin if the stock price has a large gain and is hedged against a large loss. The owner of the put gets a high margin if the stock price has a large loss and is hedged against a large gain. 2. DELTA of a call option increases from 0 to 1 as the option moves from out of the money to in the money. DELTA of a put option decreases from 0 to -1 as the option moves from out of the money to in the money. 3. If an option is in-the-money, as the expiration date approaches the chance that the option will leave being in-the-money decreases. Thus, any change in option price becomes more and more likely to represent the change in stock price on the expiration date. If an option is out of the money, as the expiration date approaches the chance that the option will leave being out-of-the-money decreases. Thus, any change in option price becomes more and more likely to represent the change in stock price on the expiration date. 4. As time to expiration decreases: .an AMERICAN PUT's premium tends to decrease. The put gets closer to losing the option to exercise early and time value. .a EUROPEAN PUT's premium usually decreases as it loses time value. Yet, when the owner of the put would prefer to exercise the option before the expiration date, the time value is negative. In such cases, as the option approaches expiration, the price of the put can rise towards 0. 5. Using the Excel sheet and assuming three months = 92 days. Value of Call Option $63.17 DELTA of Call Option 0.55 Value of Put Option $55.69 DELTA of Put Option -0.45 6.