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, Δ = 0.527, Γ = .018, and θ = -.016.
If the price of the stock were to move to $74.
A) Use the Δ approximation to estimate the new price of the call option.
B) Use the Δ- Γ approximation to estimate the new price of the call option.