A call option has a delta of 0.48 and sells for $6.59. What is the estimate of the new call price if the stock price increases by $0.75?
A) $6.83
B) $6.72
C) $7.01
D) $7.07
E) $6.95

Question

Quizplus · Accepted Answer

The new call price can be estimated using the delta value. Delta represents the rate of change of the option's price with respect to the stock's price. Here, a delta of 0.48 means for every $1 increase in the stock price, the call option's price increases by $0.48. For a $0.75 increase in stock price, the increase in call price = 0.48 * $0.75 = $0.36. Adding this to the original call price of $6.59 gives $6.95.

A Call Option Has a Delta of 0