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What position shares is necessary to hedge a short position in one call option?   short sell 1 share   short sell 0.35 shares   purchase 0.65 shares   purchase 0.35 shares   short sell 0.65 shares

What position shares is necessary to hedge a short position in one call option?   short sell 1 share   short sell 0.35 shares   purchase 0.65 shares   purchase 0.35 shares   short sell 0.65 shares

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter5: Financial Options
Section: Chapter Questions
Problem 4MC
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A stock price is currently $68 and it is expected that the stock price wilether increase by 10K or fall by 10% over the next two months. The risk-free interest rate is 2.8% per annum with continuous compounding. Consider a two-month call option on the stock with stike 570. What position shares is necessary to hedge a short position in one call option?

 

short sell 1 share

 

short sell 0.35 shares

 

purchase 0.65 shares

 

purchase 0.35 shares

 

short sell 0.65 shares

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