Part (c) asked candidates to explain the characteristics of a long call option with a high gamma value. Answers to this part were poor and few candidates were aware of what gamma is and what a high gamma meant in relation to a long call option.

Fortunately, this part was only worth 3 marks, but candidates need to be aware that delta, gamma, theta, vega and rho are in the study guide of the syllabus and, can and will be examined. There also appears to be some confusion about what a long call meant.

A long call is buying the right to buy an underlying asset at a pre-determined price, whereas a short call is selling the right to buy an underlying asset at a pre- determined price (and similarly for put options). Some candidates thought that a long call was referring to the period prior to expiry of the option.