Which One of the Following Is the Correct Formula for Approximating

question 49

Multiple Choice

Which one of the following is the correct formula for approximating the change in an option's value given a small change in the value of the underlying stock?

• A)Change in option value ≈ Change in stock value/Delta
• B)Change in option value ≈ Change in stock value/(1 - Delta)
• C)Change in option value ≈ Change in stock value/(1 + Delta)
• D)Change in option value ≈ Change in stock value × (1 - Delta)
• E)Change in option value ≈ Change in stock value × Delta

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