Chapter 05 · Section 5.1
Example - Premium
Consider the following American option:June 90 XYZ Call.
Current date : February
Current price of XYZ : $90
Current premium : $ 5
Gamma : 0.2
Delta : 0.5
If the price of XYZ were to move up $1, what should happen to the premium?
c) The premium will go up about $.50 because the delta factor is 0.5.
Yes. A delta factor of 0.5 means that for each unit change in the price of the underlying, the premium will change $.50.Continue
d) The premium will go up about $.50 because the delta factor is 0.5.
a) The premium will not change.
b) The premium will go up about $.20 because the gamma factor is 0.2.
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