What happens to the delta of the portfolio

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Reference no: EM132054494

A collar is established by buying a share of stock for $45, buying a 6 month put option with exercise price $38, and writing a 6 month call option with exercise price $52. On the basis of the volatility of the stock, you calculate that for a strike price of $38 and expiration of 6 months, N(d1) = .7314, whereas for the exercise price of $52, N(d1) = 0.6192.

a. What will be the gain or loss on the collar if the stock price increases by $1? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

b-1. What happens to the delta of the portfolio if the stock price becomes very large? (Omit the "$" sign in your response.) Delta of the portfolio approaches:

b-2. What happens to the delta of the portfolio if the stock price becomes very small? (Omit the "$" sign in your response.) Delta of the portfolio approaches:

Reference no: EM132054494

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