Suppose that you own 100 shares of the underlying stock. You would like to use options to
Fantastic news! We've Found the answer you've been seeking!
Question:
More specifically, you would like to create an investment portfolio by combining your 100 shares with either long or short positions in the options contracts such that the value of the portfolio will be the same no matter what the realised price of the stock becomes. Assume the price of each call is 0.632 and, the price of each put is 1.50
1. Assuming you use call options to hedge 100 shares, how many call options should you long or short? How much do you pay for these calls?
2. To provide portfolio insurance for these 100 shares, could you use put options? If so, how many and how much would it cost?
Related Book For
Posted Date: