Suppose that you have a short position in 10 3-month call option contracts. How do you hedge this long position in calls using 3-month puts? Should you long or short the puts? And how many put contracts should you trade? Assume that the current delta of the call option is 0.328 and delta of the put option is -0.672.

a) Should you long or short the put option contract?

b) How many put options contracts should you trade?

Answer rating: 100% (QA)

To hedge a short position in 10 3month call option contracts you would need to long the ... View the full answer