Consider a stock paying continous dividens of 1 assume r006

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Reference no: EM13612746

Consider a stock paying continous dividens of 1%. Assume r=0.06 $\sigma=0.32$ stock price of s(0)=33.

a) You sell 100 Calls with strike K=35 and expiration in 68 days (assume 365 days in a year). You also constuct a delta-hedge to manage your risk. If tomorrow (1 day after) stock price rises to $34.50. Find your net profit/loss from your hedged portfolio.

b) Repeat this problem for the case of selling 100 Puts with strike K=35 and all other parameters staying the same.

Reference no: EM13612746

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