You are a trader for GreekLetters Ltd. You have sold 100,000 put options on a stock at strike $24.5 and also short 50,000 of the stock. The options expire in 9 months. The stock is currently trading at $24.09, and its volatility is estimated at 25% p.a.c.c. It pays a dividend of 2% p.a.c.c. The risk free rate of interest is 3% p.a.c.c and the option is currently selling for $0.70. How can you make your portfolio delta neutral?

You are a trader for GreekLetters Ltd. You have sold 100,000 put options on a stock at strike $24.5 and also short 50,000 of the stock. The options expire in 9 months. The stock is currently trading at $24.09, and its volatility is estimated at 25% p.a.c.c. It pays a dividend of 2% p.a.c.c. The risk free rate of interest is 3% p.a.c.c and the option is currently selling for $0.70. How can you make your portfolio delta neutral?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section20.A: The Black-scholes Option Pricing Model

Problem 1P

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