New answers tagged volatility
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The delta-gamma approximation would be:
(IOP) + (DELTA)(UPC) + (.50)(GAMMA)*(UPC)^2
where:
IOP = Initial Option Price
UPC = Underlying Price Change
So the expected new price would be:
(.50) + (.50)(51-50) + (.50)(.50)(51-50)(51-50) which equals $1.25
Note that this is just an approximation. With the stats that you offered, it's going to be close to ...
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