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Elasticity
By Martin | October 27, 2011
Properly a measure of the percentage change in the option premium for a 1% change in the asset price.
Sometimes loosely used as a synonym for delta (delta strictly measures the absolute change in the option premium for a one unit change in the underlying).
Because elasticity is usually significantly positive (a 1% change in the asset price can give rise to more than a 1% change in the option price) it is also sometimes used as a synonym for gearing.
This is most common in the warrant market, where it is calculated as delta times the price of the underlying divided by the option price.
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