RISK ANALYSIS OF GOOGL & AMZN STOCK CALL OPTIONS USING DELTA GAMMA THETA NORMAL APPROACH

Abstract

Stocks, as investment products, tend to carry risks due to fluctuations. The tendency of stock prices to rise over time leads investors to opt for call options, which are one of the derivative investment products. However, call options are influenced by several factors that can pose risks and have nonlinear dependence on market risk factors. Therefore, methods are needed to measure the risk of call options, such as Delta Normal Value at Risk and Delta Gamma Normal Value at Risk. Delta and Gamma are part of Option Greeks, parameters that measure the sensitivity of options to various factors used in determining option prices with the Black-Scholes model. This study uses an approach with the addition of Theta, which can measure the sensitivity of options to time. This study aims to analyze Value at Risk with the Delta Gamma Theta Normal approach for call options on Google (GOOGL) and Amazon (AMZN) stocks. The analysis uses closing stock price data from September 7, 2022, to September 7, 2023, and three in-the-money and out-of-the-money call option prices. The study begins by collecting closing stock prices and call option contract components, testing the normality of stock returns, calculating volatility,, Delta, Gamma, and Theta, then calculating the Value at Risk. Based on the analysis, it is found that GOOGL and AMZN call options have a Value at Risk of $0.89588 and $0.92760, respectively, at a 99% confidence level with a strike price of $120. Furthermore, based on the comparison of Value at Risk between in-the-money and out-of-the-money call options, it can be concluded that out-of-the-money call options tend to have larger estimated losses.