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hello sir , i was watching the 2nd part of your lecture on option pricing and couldnt understand one thing that u said that DELTA = N(D1) BUT WHAT i know delta value is option price change/ Share price change
I cant understand how nd1 represents option price change?
and second thing i couldnt understand why in example 5, martin could have bought 1000 shares to hedge the risk 4080 options?
I think that maybe you need to watch all of the option pricing lectures again, because I do explain.
If, for example, Nd1 was equal to 0,2. then it would mean that in the short term that if Pa (the current market price) were to change by $1 then the current option price would change by 0.2 x $1 = $0.20.
Example 5 is using exactly the same principle.
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