Washington is trying to determine the value of a call option. When the slope of the at expiration curve is close to zero the call option is: A) in-the-money. B) out-of-the-money. C) at-the-money. D) equal to the exercise price. I got the answer right, but I’m not if I understood the question.
I’m thinking this one is B.
Yep it is B. Can you please explain this sh*t? What is “at expiration curve”? I can’t find anything in the CFAI text.
I’m sure this is very very wrong, but I was imagining a chart of an option’s gamma. So if the stock is deep out of the money immediately before expiration, even a move up in price isn’t going to raise the value on a call (for example). I’ve never heard of an “at expiration curve”
delta is close to zero -> out of the money
^^ yeah maybe I meant delta too.
Even I don’t know what they mean by “at expiration curve”. And is the slope the betn. the option and the stock price? If that’s the case, then it’s delta. Gamma is the sensitivity of the delta w.r.t to the underlying.
expiration curve - pay off as a function of the value of underlying
maratikus Wrote: ------------------------------------------------------- > delta is close to zero -> out of the money makes sense. thanks!