Given the following information, necessary components of the Black-Scholes model on Non-Dividend Stock Call Option:

d1=0.175

d2=-0.025

N(d1)=0.56946

N(d2)=0.49003

What is the option Greek of Delta of this Call option on non-dividend paying stock?

Question

Given the following information, necessary components of the Black-Scholes model on Non-Dividend Stock Call Option:

d1=0.175

d2=-0.025

N(d1)=0.56946

N(d2)=0.49003

What is the option Greek of Delta of this Call option on non-dividend paying stock?

BlackTom AI · Accepted Answer

We start by identifying what the Delta of a call option on a non-dividend-paying stock is in the Black-Scholes framework. For a European call on a non-dividend stock, Delta is equal to N(d1). In the provided data, N(d1) = 0.56946, and N(d2) = 0.49003.

Option by option analysis:
- Option 0: 0.569. This value is a rounded version of N(d1) = 0.56946. Since Delta for a non-dividend stock call is N(d1), 0.569 is a reasonable rounded estimate of the true Delta.
- If we confused Delta with N(d2), we would have 0.49003, which is not correct for Delta of a call (that would correspond to the probability of finishing in the money under a different parameter, not Delta).
- If we considered Delta to be close to 1 or 0, that would ignore the given d1 value; in this scenario d1 = 0.175 implies a Delta around 0.569, not near 0 or 1, reflecting partial moneyness.

In summary, the Delta of the call option on a non-dividend-paying stock is N(d1). With N(d1) provided as 0.56946, the option’s Delta should be reported as approximately 0.569 when rounded to three decimal places. The given choice 0.569 aligns with this interpretation and the provided N(d1) value.

BUSFIN 4229 SP2025 (4930) Practice Quiz

Given the following information, necessary components of the Black-Scholes model on Non-Dividend Stock Call Option: d1=0.175 d2=-0.025 N(d1)=0.56946 N(d2)=0.49003 What is the option Greek of Delta of this Call option on non-dividend paying stock?

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