Delta of Call over time
Quantitative Finance
Level
2
The stock is trading at 100.
If all else holds constant, what would happen to the delta of the 80 call one day later?
It depends on the actual volatility
It depends on the number of days to expiry
It will increase
It will decrease
It will stay the same
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1 solution
The call is currently ITM. After a day passes, it becomes more likely that the call will end up ITM on expiration. Hence, using the interpretation of the dual delta as the probability of being in the money, we can conclude that the delta of the call has increased.
Another way of thinking about it is that on expiration, the delta of the call is 100. It currently is above 50, and will be moving closer towards 100 towards expiration.