The following market information will be used for this problem. Today May 1, 2021 98 Spot (S/unit) Volatility risk-free interest rate 18.00% 2.00% Dividend yleld 0.00% You sell 8,000 European call options with a strike of 93 and maturity My 6, 2022 at fair value. Option information for a variety of stock prices are: Option Price Option Delta Option Delta Shares -5,187 5,342 -5,493 5,638 -5,778 10.151669 64.8344 10.809791 11.487049 12.182797 97 66.7796N 68.6613 98 99 70.4772 100 12.896368 172.2254 Note, the current stock price is in the middle of the table. To hedge your position, how many shares do you buy or sell? Assume you can only trade a whole number of shares. The market moves to 96. You re-balance your delta hedge by buying or selling how many shares?
The following market information will be used for this problem. Today May 1, 2021 98 Spot (S/unit) Volatility risk-free interest rate 18.00% 2.00% Dividend yleld 0.00% You sell 8,000 European call options with a strike of 93 and maturity My 6, 2022 at fair value. Option information for a variety of stock prices are: Option Price Option Delta Option Delta Shares -5,187 5,342 -5,493 5,638 -5,778 10.151669 64.8344 10.809791 11.487049 12.182797 97 66.7796N 68.6613 98 99 70.4772 100 12.896368 172.2254 Note, the current stock price is in the middle of the table. To hedge your position, how many shares do you buy or sell? Assume you can only trade a whole number of shares. The market moves to 96. You re-balance your delta hedge by buying or selling how many shares?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![The following market information will be used for this problem.
Today
Spot (S/unit)
Volatility
risk-free interest rate
Dividend yleld
May 1, 2021
98
18.00%
2.00%
0.00%
You sell 8,000 European call options with a strike of 93 and maturity July 6, 2022 at fair value.
Option information for a variety of stock prices are:
Spot Price Option Price Option Delta % Option Delta Shares
64.8344X
66,7796X
6৪.6613४
70.4772%
172.2256%
10.151669
10.809791
11.487049
96
-5,187
-5,342
5,493
-5,638
-5,778
97
98
99
100
12.182797
12.896368
Note, the current stock price is in the middle of the table.
To hedge your position, how many shares do you buy or sell? Assume you can only trade a whole number of
shares.
The market moves to 96. You re-balance your delta hedge by buying or selling how many shares?
The market moves back to 98. You re-balance your delta hedge by buying or selling how many shares?
How much money have you made or lost on your overall position?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbfb3c6d6-5ebc-46e3-b8cf-d24e77358282%2F909d4eb3-a396-46ef-8782-27a5285ae7ef%2Foto9rp_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The following market information will be used for this problem.
Today
Spot (S/unit)
Volatility
risk-free interest rate
Dividend yleld
May 1, 2021
98
18.00%
2.00%
0.00%
You sell 8,000 European call options with a strike of 93 and maturity July 6, 2022 at fair value.
Option information for a variety of stock prices are:
Spot Price Option Price Option Delta % Option Delta Shares
64.8344X
66,7796X
6৪.6613४
70.4772%
172.2256%
10.151669
10.809791
11.487049
96
-5,187
-5,342
5,493
-5,638
-5,778
97
98
99
100
12.182797
12.896368
Note, the current stock price is in the middle of the table.
To hedge your position, how many shares do you buy or sell? Assume you can only trade a whole number of
shares.
The market moves to 96. You re-balance your delta hedge by buying or selling how many shares?
The market moves back to 98. You re-balance your delta hedge by buying or selling how many shares?
How much money have you made or lost on your overall position?
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