delta of put when asset price drop

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h21

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Reading 49 practice question 10
Apoth’s share price subsequently dropped to $36, Klein would most likely need to take the following action to maintain the same hedged position:
  1. Sell options because the put delta has become less negative.
  2. Sell options because the put delta has become more negative.
  3. Buy options because the put delta has become more negative.
The answer is
B is correct. The required number of put options = Number of shares of underlying to be hedged/[N(d1) − 1], where N(d1) − 1 is the estimated delta used for hedging a position with put options (otherwise known as the put delta). As the share price drops to $36, the delta of a put position will decrease toward –1.0, requiring less put options than the original position.

Can someone explain to me why the delta decreases? And also, what does ND1 and ND2 actually mean in the end??
 
Look at the grapth of a put option. The part of the graph from zero to the strike price has a negative slope of -1 (the line is exactly 45 degrees inclination) because it reflects the 1 by 1 increase in the put price as the underlying asset decrease. As the underlying asset price decreases, the put option increases in value and hence, the delta approaches to -1 (decreases). Now you can derive what delta is… it is just the variation in put price due the variation of the underlying asset price.
Hope this helps!
 
right then share/delta should be decreasing instead of increasing right
 
never mind, delta of put is Nd1-1,
seriously, we are suppose to memorize ALL THESE?
 
this is from EOC, how do I know if it is not?
 
haha thought so i am clearly going insane
 
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