Page 163 - AFM Integrated Workbook STUDENT S18-J19

Option pricing

Illustration 1

If the delta value is 0.5, an investor with 100 shares should therefore sell 200
call options (100 / 0.5).

Then, if the share price increased by $1,

 total movement in share value = ($1 × 100) = $100

 movement in option value = (0.5 × $1 × 200) = $100

where the share value movement represents a gain, and the option value
movement represents a loss (gain to the option holder so loss to the option
writer).

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