Suppose you hold LLL employee stock options representing options to buy 11,600 shares of LLU stock LLL accountants estimated the value of these options using the Black-Scholes-Merton formula and the following assumptions S= current stock price = $24.77 K= option strike price = $27.5 r risk-free interest rate=055 a stock volatility = 32 T= time to expiration = 3.5 years You wish to hedge your position by buying put options with three-month expirations and a $30.00 strike price. How many put option contracts are required? (Note that such a trade may not be permitted by the covenants of many ESO plans. Even if the trade were permitted, it could be considered unethical.) (Do not round intermediate calculations. Round your answer to the nearest whole number.) Number of put option contracts

Suppose you hold LLL employee stock options representing options to buy 11,600 shares of LLU stock LLL accountants estimated the value of these options using the Black-Scholes-Merton formula and the following assumptions S= current stock price = $24.77 K= option strike price = $27.5 r risk-free interest rate=055 a stock volatility = 32 T= time to expiration = 3.5 years You wish to hedge your position by buying put options with three-month expirations and a $30.00 strike price. How many put option contracts are required? (Note that such a trade may not be permitted by the covenants of many ESO plans. Even if the trade were permitted, it could be considered unethical.) (Do not round intermediate calculations. Round your answer to the nearest whole number.) Number of put option contracts

Name: Suppose you hold LLL employee stock options representing options to b
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Description: Suppose you hold LLL employee stock options representing options to buy 11,600 shares of LLU stock LLL accountants estimated thevalue of these options using the Black-Scholes-Merton formula and the following assumptionsS= current stock price = $24.7

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 2FPE: An investor is thinking about buying some shares of Health Diagnostics, Inc., at $75 a share. She...

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On July 1, an investor holds 50,000 shares of a certain stock. The market price is $30 per share. The investor is interested in hedging against movements in the market over the next month decides to use the September Mini S&P 500 futures contract. The index is currently 1,500 and one contract is for delivery of $50 times the index. The beta of the stock is 1.3. What strategy should the investor follow? Under what circumstances will it be profitable?explain it