How to use call options to protect portfolio?

User Generated

ufaq00

Business Finance

Description

An at-the-money call option with expiry 100 trading days later (for calculations consider that there are 250 trading days per year) is written on a stock XYZ. The volatility of the stock is 26% and the stock pays no dividends during the life of the option. The risk free rate is 5%. Can you find the delta of the option? Suppose that you own 5,000 shares of the stock XYZ, how can you use the available call options to make sure that your portfolio is not affected by changes in the stock in the short run?

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Explanation & Answer

check the assignment

Call Options
Name
Institutions

Delta of the option
 The presentation shows how to use call options to
protect portfolio for XYZ company.
 The delta of the option is as follows

Days to expiration

24

Futures price

F=

50.0000

Dividend (zero for futures)

D=

0.000

Adjusted asset price

F=

45.4350

Strike prioe

S=

50.0000

Risk-free...


Anonymous
Great study resource, helped me a lot.

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