14 lines
856 B
Plaintext
14 lines
856 B
Plaintext
Gamma helps as the stock price declines, too. Exhibit 4.8 shows the effect
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of time and gamma on the delta of the 37.50 call.
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EXHIBIT 4.8 Disney 37.50 call price–time matrix–delta.
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The effect of gamma is readily observable, as the delta at any point in
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time is always higher at higher stock prices and lower at lower stock prices.
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Kim benefits greatly when the delta grows from its initial level of 0.185 to
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above 0.50—above the point of being at-the-money. If the stock moves
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lower, gamma helps take away the pain of the price decline by decreasing
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the delta.
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While delta, gamma, and theta occupy Kim’s thoughts, it is ultimately
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dollars and cents that matter. She needs to translate her study of the greeks
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into cold, hard cash. Exhibit 4.9 shows the theoretical values of the 37.50
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call.
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EXHIBIT 4.9 Disney 37.50 call price–time matrix–value. |