Chapter 05 · Section 5.1

Example - The Delta Factor

Consider the same American option: June 90 XYZ Call.

Current date         :    February 
           
Current price of XYZ :         $91                
Current premium      :       $5.50
Gamma                :         0.2 
Delta                :           ?

With XYZ trading at $90, the delta of this call is 0.5 and the premium $5. If the price of XYZ were to move up $1 to $91 and the premium become $5.50, the delta factor will change to:

a) 0.2
No. 0.2 is the gamma factor. It represents the change in the delta factor and not the new delta factor.
b) 0.5
c) 0.7
d) 0.3

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