You are a trader for GreekLetters Ltd. You have sold 100,000 put options on a stock at

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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? Show full working process for marks.

Posted Date: May 15, 2024 05:19 AM

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You are a trader for GreekLetters Ltd. You have sold 100,000 put options on a stock at

Question:

Expert Answer:

To make the portfolio delta neutral we need to calculate the delta of the options and the delta of t... View the full answer

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