On 1st November, 2015 RBI decides to give a rate cut. You are option trader. Study of which option Greek should influence your decision making? This question is required.*
A. Rho
B. Gamma
C. Delta
D. Vega
Answers
The correct option is A due to the following reasons:
- The reduction in the rate of interest is the rate cut by which commercial banks can take money from RBI.
- Option greeks help in impacting the value of the option by measuring various parameters activity to the option price.
- Some of the option greeks are Delta, Theta, rho, gamma .
- The sensitivity ( extent of change in amount) of the option price measured by Delta to change in stock price.
- If the market moves up or down the change that occurs in the amount or extent of the delta of the option is measured by Gamma.
- Vega is the amount that the option price will change the votality of the market move up or down.
- If the interest rate moves up or down the amount is changed by the theoretical price is measured by rho.
- So, The correct option is (A).