A bank has just sold 500,000 call options on shares of a stock. The strike price is 40; the stock price is 40; the continuously risk-free rate is 5%; the volatility is 30%; and the time to maturity is 0.25. What position should the company take in the stock for delta neutrality?

Answer rating: 100% (QA)

Note I have assumed the lot size of 1 call option as 100 shares d InSoX t r q Volatili... View the full answer