CFA Practice Question

There are 227 practice questions for this study session.

CFA Practice Question

When gamma is large, there will be a large change in the ______.
A. option price for a small change in the underlying price
B. underlying price for a small change in the option price
C. change rate of the option price for a small change in the underlying price
Explanation: Gamma measures how sensitive the delta is to a change in the underlying and delta measures the change rate of the option price for a small change in the underlying price.

User Contributed Comments 4

User Comment
americade lesson for people who only read one choice quickly, #1 will trick you everytime, though you know what gamma is.
osunks Very true. I went for 1 and did not read the other choices, even though i know gamma in my sleep.
richmondo Think of gamma as the second derivative -
bodduna First choice is Delta.
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