- CFA Exams
- CFA Level I Exam
- Study Session 14. Derivatives
- Reading 38. Valuation of Contingent Claims
- Subject 6. Option Greeks and Implied Volatility
CFA Practice Question
For a call option with a delta of 0.2, a $0.90 decrease in the underlying price (current price: $2.37) will cause the price of the call option to ______
A. increase by $0.18.
B. decrease by $0.18.
C. It's hard to determine given the information.
Explanation: In this case the approximation based on delta would be not accurate as the price change is pretty large (38%).
User Contributed Comments 4
| User | Comment |
|---|---|
| danlan2 | Good one. |
| osunks | This bit me hard! Dived for $0.18. Nice one! |
| volkovv | Good question. I got tricked into $0.18 as well. |
| paolino9290 | you'd also need to know the option gamma |