A call option on a non-dividend-paying stock has a strike price of $30 and a time to maturity of six months.The risk-free rate is 4% and the volatility is 25%.The stock price is $28.What is the delta of the option?
A) N(-0.1342)
B) N(-0.1888)
C) N(-0.2034)
D) N(-0.2241)

Question

Quizplus · Accepted Answer

The delta of a call option is given by N(d1), where d1 is calculated using the Black-Scholes formula. For this option, d1 = (ln(28/30) + (0.04 + 0.5*0.25^2)*0.5) / (0.25*sqrt(0.5)) = -0.1888. Therefore, the delta is N(-0.1888).

A Call Option on a Non-Dividend-Paying Stock Has a Strike