How many call options must you buy

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The share price of Honeybear Inc. is $44.75. Call options written on Honeybear have an exercise price of $40 and mature in 71 days. The risk-free rate is 62%, and the instantaneous price variance of Honeybear is 9.61% (i.e., o- = .31). What actions must you take in order to create a perfect hedge in the following situations?

a) If you own 100 shares of Honeybear stock, how many call options must you buy (sell)?

b) If you own five put option contracts, how many shares of stock do you need?

c) If you own one call contract, how many put contracts do you need?

Reference no: EM131247146

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