Find delta-hedged position

Assignment Help Finance Basics
Reference no: EM132688954

A six-month European 50-strike call option on XYZ stock currently has a delta of 5 and a gamma of 10. You are currently short in a six month 50-strike european straddle on XYZ stock and long in certain amount of the stock to hedge your total delta to zero. If the stock price suddenly moves down by 80 cents, the loss of your delta-hedged position in the straddle
A. is approximately 7.2 dollars
B. is approximately 6.4 dollars
C. is approximately 3.2 dollars
D. cannot be determined without giving the information about the Greeks of the put option on the XYZ stock.

Reference no: EM132688954

Questions Cloud

What is the sensitivity of project ocf to changes : What is the sensitivity of the project OCF to changes in the quantity supplied?
Calculate the sensitivity of base-case npv to changes : You are considering a new product launch. The project will cost $900,000, have a 4-year life, and have no salvage value; depreciation is straight-line to zero.
Explain reasons why employees are valuable assets : Explain the main reasons why employees are valuable assets, and why the organization should treat them well. [You could look for journal articles.
Determine the break-even purchase price : The Cornchopper Company is considering the purchase of a new harvester. The new harvester is not expected to affect revenue, but operating expenses
Find delta-hedged position : A six-month European 50-strike call option on XYZ stock currently has a delta of 5 and a gamma of 10. You are currently short in a six month 50-strike european
Develop a written proposal for a pay adjustment plan : A relatively new approach to pay-for-performance is a hybrid system that includes Cost of Living Allowances (COLAs) and performance based pay adjustments.
How an insurer obligation is affected : Most property and liability policies contain a provision that specifies how an insurer's obligation is affected by the existence of other insurance that covers
Develop argument for typical japanese-style and german-style : Develop an argument for and against "typical" Japanese-style, "typical". German-style, and "typical" U.S. -style approaches to pay. What factors are causing.
Length of cash conversion cycle-mark manufacturing : Mark's Manufacturing's average age of accounts receivable is 45 days, the average age of accounts payable is 40 days, and the average age of inventory is 69 day

Reviews

Write a Review

Finance Basics Questions & Answers

  What are some differences in the analysis for a replacement

What are some differences in the analysis for a replacement project versus that for a new expansion project?

  Find earnings per share under the current situation

Find earnings per share under (1) the current situation, (2) the greater debt proposal, and (3) the greater equity proposal.

  Question regarding the health care ethics

What is the difference between common sense and practical wisdom in health care? What are some emerging models and roles for healthcare providers, and how do these new models and roles underscore the need to understand how to use common sense or p..

  Calculate the npv of the decision to grant credit

Solar Engines manufactures solar engines for tractor-trailers. Given the fuel savings available, new orders for 160 units have been made by customers requesting

  Describe the advantages and disadvantages of each method

Describe the use of internal rate of return (IRR), net present value (NPV), and the payback method in evaluating project cash flows. Describe the advantages and disadvantages of each method.

  What is the payback if an investment cost is given

What is the payback if an investment's cost is $45,000 and the after-tax benefit is $2,000 per year? The response must be typed.

  Assume that there are only two inputs labor and natural

assume that there are only two inputs labor and natural resources producing two goods movies and gasoline with no

  Determine factor in long-term financial decisions

Explain how the time value of money plays a factor in long-term financial decisions.

  Lowest sum of total carrying cost and total shortage cost

That is, the lowest sum of total carrying cost and total shortage cost. Enter your answer rounded off to two decimal points. Margin for error: +/- $10

  What is the current year nfo

If last year's NFO is $132,959, the current year's free cash flow is $84,699, current year's net financial income is $14,619 and current year

  Firm operating in global economy

Define as many new risks that a firm operating in the global economy is faced with in comparision to firms operating entirely in one country.

  What is cm collection float

CM Enterprises estimates that it takes, on average, two days for customers' payments to arrive, one day for the payments to be processed and deposited.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd