Question
You calcualted the Greeks of a put option on the S&P 500 index. The index value is 3748, volatility 23.37% per year, and interest rate
You calcualted the Greeks of a put option on the S&P 500 index. The index value is 3748, volatility 23.37% per year, and interest rate 0.09% per year. The option's strike price is 3400 and time to expiration 0.25 years. You obtained the following results (rounded):
Put Premium = 47
Delta = -0.19
Gamma = 0.0006
Vega = 5
Theta = -0.93
Which of the following statements is CORRECT?
| a. | If the volatility of the index rises by 1% (from 23.37% to 24.37%) in the next instant, the option value will drop by $0.93 | |
| b. | If one trading day passes and nothing else will change over that day, option price will become $52 | |
| c. | For an instantaneous 1 point increase in the S&P 500 index, the put premium will increase by 19 cents | |
| d. | For an instantaneous 1 point move in the S&P 500 index, the Delta of this put option will decrease in absolute value to (0.19 - 0.0006) = 0.1894 |
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