Question: Suppose S = 40, = 0.3,r = 0.08, and = 0. Suppose you sell a 45-strike call with 91 days to expiration. (a) What is

Suppose S = 40, = 0.3,r = 0.08, and = 0. Suppose you sell a 45-strike call with 91 days to expiration.

(a) What is delta?

(b) If the option is on 100 shares, what investment is required for a delta-hedged portfolio? What is your overnight profit if the stock tomorrow is 39? What if the stock price is 40.50?

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