Repeat the previous problem for a 40-strike 180-day put. Previous problem Consider a 40-strike 180-day call with
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Consider a 40-strike 180-day call with S = $40. Compute a delta-gamma-theta approximation for the value of the call after 1, 5, and 25 days. For each day, consider stock prices of $36 to $44.00 in $0.25 increments and compare the actual option premium at each stock price with the predicted premium. Where are the two the same?
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See Table 4 Note the errors are larger the farther out we go as the theta will be changing With the one day the error is minimal at S 40 because S does not vary and little error due to our theta appro...View the full answer
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