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The option price graph below (the purple line) is of a General Motors Option that is delta hedged. What is impact on the price of
The option price graph below (the purple line) is of a General Motors Option that is delta hedged.
What is impact on the price of the option for small movement in the spot rate?
A.
Significant. For small moves in spot traders will lose the entire distance between the purple and the green lines.
B.
can't really tell from the picture ot because it is delta hedged
C.
this shows only the impact of interest rates and dividends
D.
Zero or very minimal. That is why traders delta hedge to remove the impact of spot changes and be focused on volatility changes.
6.00 >4.00 2.00 0.00 Profit & Loss -2.00 -4.00 -6.00 25.00 30.00 35.00 40.00 50.00 55.00 60.00 65.00 45.00 PriceStep by Step Solution
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