A 6-month call option on ABC stock is priced at $2.80. The call option delta is .66. How will the approximate call option price be computed if the underlying stock price increases by $1?
A)$2.80
B)$2.80 − $.66
C)$2.80 + $.66
D)$2.80 × .66
E)$2.80 × (1 + .66)

Question

Quizplus · Accepted Answer

The call option delta of .66 means that for every $1 increase in the underlying stock price, the call option price will increase by approximately $0.66. Therefore, if the underlying stock price increases by $1, the approximate call option price will be $2.80 + ($1 × .66) = $3.46.

A 6-Month Call Option on ABC Stock Is Priced at $2.80