- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 34. Valuation of Contingent Claims
- Subject 6. Option Greeks and Implied Volatility

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**CFA Practice Question**

A call option with an exercise price of $25.00 is currently valued at $3.22. The price of the underlying asset itself is $24.75. If the price of the underlying asset appreciates to $25.50 and the delta of the option is 0.35, what will be the return from holding the call option?

A. 3.45%

B. 5.43%

C. 8.15%

**Explanation:**Delta = change in the value of the call / change in the value of the asset

0.35 = Δc/(25.50 - 24.75) => Δc = 0.2625. The call value should increase by 0.2625 or 0.2625/3.22 = 8.15%.

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