One useful piece of information derived from the Black-Scholes model for the valuation of a call option is the hedge ratio, which gives the slope of the line relating the change in the price of an option to the change in the price of the stock.

a) If the delta is 0.6 and the investor owns 600 shares of stock, how may the investor use call options to hedge the position?

b) If the investor buys a call option on 100 shares, what position in the stock and how many shares will offset movement in the price of the option?

The body of the text explained put–call parity through the use of arbitrage. Arbitrage is not limited to put–call parity. Problems 8 through 10 also illustrate arbitrage.