1. Using the inputs given below, you have to calculate the Option Greeks-Delta, Gamma, Theta and Vega. You do not have to submit these values as part of your report.

2. You are required to:

a. provide reasons why delta of ITM and ATM calls behave the way they do when you change the inputs.

b. provide reasons on why the ATM option's vega behaves the way it is does when you change the inputs

c. make two suggestions on how your observations on option Greeks can be used for setting up trading strategies.

3. Submission deadline is June 14, Tuesday. Please mention your group number and the members in your group on the first page of your report.

4. Your report has to be in a word document (Arial font size 11) converted into a PDF. The format is as follows:

Part 1

Delta of the ITM option increases/decreases/remains the same when volatility increases/decreases. This is because ......

Delta of the ITM option increases/decreases/remains the same when days to expiry increases/decreases. This is because ......

Delta of the ATM option increases/decreases/remains the same when volatility increases/decreases. This is because ......

Vega of the ATM option increases/decreases/remains the same when volatility increases/decreases. This is because ......

Vega of the ATM option increases/decreases/remains the same when days to expiry increases/decreases. This is because ......

Part 2

Strategies based on option Greeks

For a positive view on the underlying:

For a negative view on the underlying:

5. Inputs for calculating option Greeks. Please use the Espen Haug Option Calculator

Base inputs:

Call strike 800, 1000, 1200

Spot price 1000

Vols 20%

Days to expiry: 25

Interest rate: 5%

Scenario 1: Apply all the base inputs to calculate option Greeks

Scenario 2: Change vols from 20% to 30% using all other base inputs

Scenario 3: Change vols from 20% to 10% using all other base inputs

Scenario 4: Change days to expiry from 25 days to 5 days using all other base inputs

Scenario 5: Change days to expiry from 25 days to 5 days, vols from 20% to 30% using all other base inputs.

Scenario 6: Change days to expiry from 25 days to 5 days, vols from 20% to 10% using all other base inputs.