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You own 10,000 shares of ABC which is trading at $25. ATM Calls are $8.50 with a Delta of .43 ATM Puts are $6.25 with a Delta of -.37 How would you hedge your position using calls (each option represents 100 shares)? What are your total losses/gains if ABC trades at $20? Write 149 calls; you have lost $85 Write 233 calls; you have made $50,095 Buy 233 calls; you have lost $95 Write 233 calls: you have gained $95

You own 10,000 shares of ABC which is trading at $25. ATM Calls are $8.50 with a Delta of .43 ATM Puts are $6.25 with a Delta of -.37 How would you hedge your position using calls (each option represents 100 shares)? What are your total losses/gains if ABC trades at $20? Write 149 calls; you have lost $85 Write 233 calls; you have made $50,095 Buy 233 calls; you have lost $95 Write 233 calls: you have gained $95

Essentials Of Investments
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
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You own 10,000 shares of ABC which is trading at $25. ATM Calls are $8.50 with a Delta of .43 ATM Puts are $6.25 with a Delta of -.37 How would you hedge your position using calls (each option represents 100 shares)? What are your total losses/gains if ABC trades at $20? Write 149 calls; you have lost $85 Write 233 calls; you have made $50,095 wered Buy 233 calls; you have lost $95 Answer Write 233 calls: vou have gained $95.
Transcribed Image Text:You own 10,000 shares of ABC which is trading at $25. ATM Calls are $8.50 with a Delta of .43 ATM Puts are $6.25 with a Delta of -.37 How would you hedge your position using calls (each option represents 100 shares)? What are your total losses/gains if ABC trades at $20? Write 149 calls; you have lost $85 Write 233 calls; you have made $50,095 wered Buy 233 calls; you have lost $95 Answer Write 233 calls: vou have gained $95.
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