Identify the hedging strategy

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Reference no: EM131526490

Jane bought some Company A shares at a price of $8.00per share and decides to construct a hedge using an equal number of call options with an exercise price of $7.50, and a cost of $1.00 per option. Required: Identify the hedging strategy used by Jane and calculate the profit per share for expiry share-prices of $7.00 and $10.00. Ignore the time difference between the purchase or sale of the option and its expiry.

Reference no: EM131526490

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