Consider a binomial model with a stock with starting price of $100. Each period the stock can

Question:

Consider a binomial model with a stock with starting price of $100. Each period the stock can go up 5% or drop 3%. An investment bank sells for $0.80 a European call option on the stock that matures after five periods and has a of $120. Interest rate per period is 2%. Describe the steps to be taken by the investment bank in order to start hedging this short position at the moment the option is sold.
Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.