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Basic Question 17 of 32
Which statement is correct?
I. For a call option, the more gamma increases, the greater the underlying value.
II. For a call option, the more delta increases, the greater the underlying value.
User Contributed Comments 4
| User | Comment |
|---|---|
| LRS24 | As the stock price increases the call option becomes relatively more in the money and thus delta increases also towards 1. |
| bmeisner | Yeah II is of course right. Delta is increasing in share price. |
| Smiley225 | Also had II as correct. Deeper in the money, delta moves towards 1. |
| jhmorris | The given answer is correct because the two statements do not make any reference to the moneyness of the options, rather the value of the underlying asset. In this case, it's saying that a call option on an asset valued at $100 would have gamma/delta changes that are greater than an asset valued at $25, which would be incorrect. |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
interpret each of the option Greeks;
describe how a delta hedge is executed;
describe the role of gamma risk in options trading;
define implied volatility and explain how it is used in options trading.
CFA® 2025 Level II Curriculum, Volume 5, Module 32.