Question

The current stock price of Alcoco is $70, and the stock does not pay dividends. The instantaneous risk-free rate of return is 6%. The instantaneous standard deviation of Alcoco's stock is 40%. You want to purchase a call option on this stock with an exercise price of $75 and an expiration date 30 days from now. Based on the Black-Scholes OPM, the call option's delta will be __________.

Answer 1

Answer:

0.31

Explanation:

current stock price $70

risk free rate = 6%

standard deviation = 40$

30 day call option $75

the simplest way to calculate delta (or stock position) is to use a scientific calculator, but if you want you can also do it manually:

delta = N(d₁) ⇒ cumulative normal distribution probability at d₁

with d₁ = [ln (S/K) + (r2  + σ ²/2)T] / σ√T