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Hi Mr. Moffat,
Hope you’re doing great.
I’m at the final phase of my revision before moving on to practice and I was wondering if I have to know what the terms N(d1) & N(d2) or Pe^-rt (combined) actually mean and when to add 0.5 or subtract 0.5 from the answer because I really do not think that it is our area of expertise and we just need to get an answer and also the BSOP calculator gives us the value of the call/put option.
But I’m just asking because there’s a table given for the Nd and also the BSOP formula in the formula sheet and I need to be sure. So, I only need to confirm my understanding… Other than that, I’m clear on the real options 🙂
Edit: I forgot about the delta hedging so please ignore what I said about N(d1). What’s actually confusing me is why have they given the Nd table in the formula sheet when the calculator calculates everything for you? Am I missing something because I haven’t skipped any part of the syllabus?
No, you are not missing anything.
They are trying to make life a little easier for you (they didn’t used to give the BSOP calculator and yo used to have to do it yourself using the tables).
They could test separately that you understand what the table is giving, although I doubt that they will ever do that.
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