17 lines
1.1 KiB
Plaintext
17 lines
1.1 KiB
Plaintext
is just under 0.50, while that of the call is just over 0.50. The disparate, yet
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related deltas represent the main difference between these two trades.
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The difference between the gamma of the 35 put and that of the
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corresponding call is fairly negligible: 0.174 versus 0.166, respectively. The
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gamma of this ATM put will enter into the equation in much the same way
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as the gamma of the ATM call. The put’s negative delta will become more
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negative as the stock declines, drawing closer to −1.00. It will get less
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negative as the stock price rises, drawing closer to zero. Gamma is
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important here, because it helps the delta. Delta, however, still remains the
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most important greek. Exhibit 4.14 illustrates how the 35 put delta changes
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as time and price change.
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EXHIBIT 4.14 Disney 35 put price–time matrix–delta.
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Since this put is ATM, it starts out with a big enough delta to offer the
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directional exposure Mick desires. The delta can change, but gamma
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ensures that it always changes in Mick’s favor. Exhibit 4.15 shows how the
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value of the 35 put changes with the stock price.
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EXHIBIT 4.15 Disney 35 put price–time matrix–value. |