Chapter 05 · Section 5.1
Example - Price Drop
Consider the same 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 drop $2, the new premium should be:
d) 4.60
No. Do not confuse delta and gamma factors. The delta factor represents a change in the premium, whereas the gamma factor represents a change in the delta factor.
e) 4.00
a) 4.50
b) 6.00
c) 4.20
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