Mobius Striptease Wrote: ------------------------------------------------------- > bchadwick Wrote: > -------------------------------------------------- > ----- > > > > > Option DELTA = N(d1) ~ 0.9525 > > > > no, Option DELTA = N(d1)*exp(-q*T) where q is > dividend yield. > > If non-dividend paying stock, then q=0, so the > expression reduces to > Option DELTA = N(d1), something often seen around > in textbooks I think I agree with Mobius here…
IheartMath Wrote: ------------------------------------------------------- > MattLikesAnalysis Wrote: > > > whats the price of the call option? > > > Call price = Stock Price * e^(-T*div) * N(d1) - > Strike Price * e^(-r *T) * N(d2) > > where d2 = d1 - sigma * T^(1/2) > > ill let someone else do this out and heres the formula for call option price, bchadwick
IheartMath Wrote: ------------------------------------------------------- > > then call option delta would equal = N(d1) * > e^-(T* div rate) yep you tabled it way back on page 2
Ok what about the premium piece? What if the at the money option is trading at a significant premium, wouldn’t that affect the delta as well? If its trading at a 100% premium, (i.e. A strike price $10 call option trading at $2 will have a delta significantly lower) Or am I like way off on this one?
Mobius Striptease Wrote: ------------------------------------------------------- > bchadwick Wrote: > -------------------------------------------------- > ----- > > > > > Option DELTA = N(d1) ~ 0.9525 > > > > no, Option DELTA = N(d1)*exp(-q*T) where q is > dividend yield. > > If non-dividend paying stock, then q=0, so the > expression reduces to > Option DELTA = N(d1), something often seen around > in textbooks I stand corrected by MobiusStriptease and IheartMath, and don’t have a problem saying I was wrong. As I said, I’m not really an options guy (other than risk control) and it’s been years since I played with BS.
IheartMath Wrote: ------------------------------------------------------- > i said this like 20 min ago, but i bet theyll > listen to you. Don’t worry, I skip through this thread to your posts exclusively so your voice won’t go unheard.
winner: page 2 I shall leave the math to you and i’ll stick to arbitrary analysis and financial philosophy. all bow to our new queen. though I wasn’t really arguing your point, i just missed how the PV of dividends worked into all of this again. IHeartMath: i get N(d1) = .9857… which is equal to call option delta… this would change if you factored in dividends. then: d1 = ((ln(s/k) + (rfr - div rate + .5*volatility^2)*T)/(volatility*T^(1/2)) then call option delta would equal = N(d1) * e^-(T* div rate) also, i was hungry and went to lunch right around this time.
i feel so honored!!! now all i need is a date… ps - i forgive you mattlikesanalysis. we are back on speaking terms.
well i got the non-dividend paying delta much greater than 0.5 part of the question right. Will you consider a lowly Big Bang Theory viewer like me?
too bad you’re married. =( i rather enjoyed our little debate.
Matt use this one it will surely get her blushing I wish I were an integral so I can be the area underneath your curve.
Matt use this one it will surely get her blushing I wish I were an integral so I can be the area underneath your curve.
hehe. not technically married, but yes, well on my way. too bad. keep it professional i suppose. ps. don’t be surprised when JTLD changes his name to IheartIheartMath
lol
But it does look like a non-dividend paying option does have a delta close to 1 in the scenario we calculated (ie everything the same except dividend=0). As for delta=prob of being ITM, I don’t use it myself, but I always thought the interpretive value was worth thinking about. The math here suggests that Dividends and RFR can mess this up. Again, just thinking out loud here. I’d have to review option pricing models to be sure. Moments like this one really feels the absence of JDV.
ZeroBonus Wrote: ------------------------------------------------------- > Matt use this one it will surely get her blushing > > I wish I were an integral so I can be the area > underneath your curve. Better one for the math ladies: i wish i was a differentiable function so i can be tangent to your smooth curves.
wow guys… really?
Forgive me if I’ve missed something, but are folks really saying that the delta of a call option with 70 years to expiration is near 1? How can that possibly be given the amount of uncertainty regarding the underlying’s price over such a very long period?
we ended up agreeing that it is not…
Captain Windjammer Wrote: ------------------------------------------------------- > Forgive me if I’ve missed something like 6 pages of text preceeding your posting you mean?