Delta and Vega of a Long Call Option

Very Hard Option Valuation Greeks

In a recent investment analysis, a Portfolio Manager is assessing the risk exposure of a long call option on a stock. The underlying stock price is currently $100, the strike price of the call option is $95, and the option is currently priced at $10. Additional inputs include a volatility of 20%, an interest rate of 5%, and the time to expiration is 6 months. The Portfolio Manager is particularly interested in the Delta and Vega of the option to understand how the option price will change in relation to small movements in the underlying stock price and changes in volatility.

Given this context, which of the following statements regarding the Delta and Vega of the option is MOST accurate?

The Delta of the call option is positive while the Vega is low due to the relatively low implied volatility.

The Delta of the call option is negative when the option is deep in-the-money, while the Vega increases with higher implied volatility.

Both Delta and Vega of the call option are positive and will increase as the underlying stock price increases.

Hint

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