Suppose you are considering selling a one year call options with a strike price of $80 for a stock that is currently trading at $75. The risk free interest rate is 4%.
The cost per option is $8.152, ? = 0.527, G = .018, and ? = -.016.
If the price of the stock were to move to $74.
A)Use the approximation to estimate the new price of the call option.
B) Use the - G approximation to estimate the new price of the call option.