Suppose that call options on ExxonMobil stock with time to expiration 3 months and strike price $60

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Suppose that call options on ExxonMobil stock with time to expiration 3 months and strike price $60 are selling at an implied volatility of 30%. ExxonMobil stock currently is $60 per share, and the risk-free rate is 4%. If you believe the true volatility of the stock is 32%, how can you trade on your belief without taking on exposure to the performance of ExxonMobil? How many shares of stock will you hold for each option contract purchased or sold?

Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.
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Investments

ISBN: 9780073530703

9th Edition

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

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