An options market day trader follows a stock he wishes to bet on. The price is...

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An options market day trader follows a stock he wishes to bet on. The price is $80 with a standard deviation of 0.4. The risk-free rate is 6%. He calculates the sensitivities for two options: a European call option and a European put option. Tables 1 and 2 below reports the findings: Table 1: Call option Stock THETA VEGA RHO $60 -4.8821 6.1656 1.7405 $65 0.2094 -7.8745 9.7886 3.3281 $70 0.3247 -10.8194 13.1823 5.4626 $75 0.4502 -13.0861 15.5392 7.9565 $80 0.5727 -14.3025 16.4273 10.5551 $85 0.6818 -14.4384 15.8727 13.0198 $90 0.7721 -13.7135 14.2311 15.1819 $95 0.8423 -12.4623 11.9840 16.9591 $100 0.8942 -11.0048 9.5724 18.3424 DELTA 0.1169 Table 2: Put option THETA RHO Stock DELTA $60 -0.8831 -19.8200 VEGA -0.1603 6.1656 -3.1528 -6.0976 13.1823 9.7886 -18.2324 -16.0979 -13.6040 $65 -0.7906 $70 -0.6753 $75 -0.5498 -8.3644 15.5392 $80 -0.4273 -9.5818 16.4273 -11.0053 $85 -0.3182 -9.7167 15.8727 -8.5407 $90 -0.2279 -8.9918 14.2311 -6.3785 $95 -0.1577 -7.7406 11.9840 -4.6013 $100 -0.1058 -6.2831 9.5724 -3.2181 GAMMA 0.0156 0.0211 0.0245 0.0252 0.0234 0.0200 0.0160 0.0121 0.0087 GAMMA 0.0156 0.0211 0.0245 0.0252 0.0234 0.0200 0.0160 0.0121 0.0087 From your understanding of options markets, compare the tables above and interpret the sensitivities the trader has calculated. An options market day trader follows a stock he wishes to bet on. The price is $80 with a standard deviation of 0.4. The risk-free rate is 6%. He calculates the sensitivities for two options: a European call option and a European put option. Tables 1 and 2 below reports the findings: Table 1: Call option Stock THETA VEGA RHO $60 -4.8821 6.1656 1.7405 $65 0.2094 -7.8745 9.7886 3.3281 $70 0.3247 -10.8194 13.1823 5.4626 $75 0.4502 -13.0861 15.5392 7.9565 $80 0.5727 -14.3025 16.4273 10.5551 $85 0.6818 -14.4384 15.8727 13.0198 $90 0.7721 -13.7135 14.2311 15.1819 $95 0.8423 -12.4623 11.9840 16.9591 $100 0.8942 -11.0048 9.5724 18.3424 DELTA 0.1169 Table 2: Put option THETA RHO Stock DELTA $60 -0.8831 -19.8200 VEGA -0.1603 6.1656 -3.1528 -6.0976 13.1823 9.7886 -18.2324 -16.0979 -13.6040 $65 -0.7906 $70 -0.6753 $75 -0.5498 -8.3644 15.5392 $80 -0.4273 -9.5818 16.4273 -11.0053 $85 -0.3182 -9.7167 15.8727 -8.5407 $90 -0.2279 -8.9918 14.2311 -6.3785 $95 -0.1577 -7.7406 11.9840 -4.6013 $100 -0.1058 -6.2831 9.5724 -3.2181 GAMMA 0.0156 0.0211 0.0245 0.0252 0.0234 0.0200 0.0160 0.0121 0.0087 GAMMA 0.0156 0.0211 0.0245 0.0252 0.0234 0.0200 0.0160 0.0121 0.0087 From your understanding of options markets, compare the tables above and interpret the sensitivities the trader has calculated.

Answer rating: 100% (QA)

TABLE 1 CALL OPTION The buyer of a call option has the right but not the responsibility to purchase the underlying asset at the strike price establish... View the full answer