medium · Quantitative Finance
A stock trades at 50. A European call option with strike 50 has a delta Δ = 0.55.
Which of the following is the best interpretation of this delta value?
- The trader should buy 0.55 shares for every option sold to maintain a neutral position.
- The option value will increase by $0.55 for every $1.00 increase in volatility.
- There is a 55% actual physical probability the stock will end above 50.
- The stock price is expected to rise by 55% over the life of the option.
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