The current price of a non-dividend-paying stock is $30. Over the next six months it is expected to rise to $36 or fall to $26. Assume the risk-free rate is zero

1. What long position in the stock is necessary to hedge a short call option when the strike price is $32? Give the number of shares purchased as a percentage of the number of options that have been sold.

2. What is the value the call option?

Answer rating: 100% (QA)

1 Assuming no of option purchased 100 For hedging the investor mus... View the full answer