Question: The following market information will be used for this problem. Today Spot (S/unit) May 1, 2021 98 Volatility risk-free Interest rate 18.00X 2.00% Dividend

The following market information will be used for this problem. Today Spot

The following market information will be used for this problem. Today Spot (S/unit) May 1, 2021 98 Volatility risk-free Interest rate 18.00X 2.00% Dividend yleld 0.00% You sell 8,000 European call options with a strike of 93 and maturity July 6, 2022 at fair value. Option information for a varlety of stock prices are: Spot Price Option Price Option Delta % Option Delta Shares -5,187 -5,342 -5,493 -5,638 5,778 96 10.151669 10.809791 64.8344X 66.7796X 97 11.487049 12.182797 12.896368 98 68.6613% 99 100 70.4772X 172.2256% Note, the current stock price is in the middle of the table. To hedge your position, how many shares do you buy or sell? Assume you can only trade a whole number of shares. The market moves to 96. You re-balance your delta hedge by buying or seliing how many sharest The market moves back to 98. You re-balance your delta hedge by buying or selling how many shares? How much money have you made or lost on your overall position?

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ANSWERA NO OF SHARES BOUGHT TO HEDGE YOUR POSITION OPTION DELTA NO OF OPTIONS SOLD 686613 8... View full answer

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