Braddock Construction Co.'s stock is trading at $20 a share. Call options that expire in three...
Braddock Construction Co.'s stock is trading at $20 a share. Call options that expire in three months with a strike price of $20 sell for $1.50. Which of the following will occur if the stock price decreases 10%, to $22 a share?
a. The price of the call option will decrease by more than $2.
b. The price of the call option will decrease by less than $2, and the percentage decrease in price will be less than 10%.
c. The price of the call option will decrease by less than $2, but the percentage decrease in price will be more than 10%.
d. The price of the call option will decrease by more than $2, but the percentage decrease in price will be less than 10%.
e. The price of the call option will increase by $2.
Homework Answers
Correct answer will be decrease in price of option will be less than 2 since delta will be negative but less than 1, but the decrease in price of option in percentage term will be more that 10% thus the correct answer is option C ie.,
c. The price of the call option will decrease by less than $2, but the percentage decrease in price will be more than 10%.
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Braddock Construction Co.'s stock is trading at $20 a share.
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