The Gamma of an Option Is

question 4

Multiple Choice

The gamma of an option is

• A) the volatility level for the stock that the option price implies.
• B) the continued updating of the hedge ratio as time passes.
• C) the percentage change in the stock call option price divided by the percentage change in the stock price.
• D) the sensitivity of the delta to the stock price.
• E) the volatility level for the stock that the option price implies and the percentage change in the stock call option price divided by the percentage change in the stock price.

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Definitions:

Statistical Formation

Refers to the process of organizing and summarizing data through the use of tables, graphs, and statistical measures to make the data understandable and usable.

Correlation

A statistical measure that indicates the extent to which two or more variables fluctuate together, showing the strength and direction of a relationship.

+.86

This could represent a statistical value, such as a correlation coefficient, indicating a strong positive relationship between two variables.

Discriminant Validity

A measure of the extent to which a construct is truly distinct from other constructs by demonstrating low correlations with measures of unrelated constructs.