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...


The following market information will be used for this problem.<br>Today<br>Spot (S/unit)<br>Volatility<br>risk-free interest rate<br>Dividend yleld<br>May 1, 2021<br>98<br>18.00%<br>2.00%<br>0.00%<br>You sell 8,000 European call options with a strike of 93 and maturity July 6, 2022 at fair value.<br>Option information for a variety of stock prices are:<br>Spot Price Option Price Option Delta % Option Delta Shares<br>64.8344X<br>66,7796X<br>6৪.6613४<br>70.4772%<br>172.2256%<br>10.151669<br>10.809791<br>11.487049<br>96<br>-5,187<br>-5,342<br>5,493<br>-5,638<br>-5,778<br>97<br>98<br>99<br>100<br>12.182797<br>12.896368<br>Note, the current stock price is in the middle of the table.<br>To hedge your position, how many shares do you buy or sell? Assume you can only trade a whole number of<br>shares.<br>The market moves to 96. You re-balance your delta hedge by buying or selling how many shares?<br>The market moves back to 98. You re-balance your delta hedge by buying or selling how many shares?<br>How much money have you made or lost on your overall position?<br>

Extracted 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?

Jun 08, 2022
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