Question: Suppose S = 40, = 0.30, r = 0.06, = 0. Suppose you sell a 45-strike call with 91-days (T = 91/365 = 0.24931) to

Suppose S = 40, = 0.30, r = 0.06, = 0. Suppose you sell a 45-strike call with 91-days (T = 91/365 = 0.24931) to expiration. Suppose the call priced at 0.9207 and = 0.2704 for a single share. If the option is on 100 shares, what investment is required for delta- hedged portfolio? Suppose tomorrow the stock price is 39. The put is now priced at 0.6664 (T = 90/365 = 0.24658) and = 0.2157 for a single share. What is your overnight profit? Suppose you is going to re-balance the portfolio for delta-hedging. What is the value of the new portfolio?

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