JPM’s stock trades at 100 and a call option on the stock with a 100 strike rate, trades at 2.6214.

Question:

JPM’s stock trades at 100 and a call option on the stock with a 100 strike rate, trades at 2.6214. The call option has a delta of 0.5252 and a gamma of 0.06295. If the stock price instantaneously increases by 3.00 and all other variables remain unchanged.

What’s your best estimate of the new price of the call option?

Expert Answer:

Answer rating: 100% (QA)

To estimate the new price of the call option after the instantaneous increase in the stock price we

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