You buy 10 at-the-money call options with expiration in 91

Reference no: EM13612738

You buy 10 at-the-money Call options with expiration in 91 days for a stock with continous dividends of 2%, volatility of 25% and current stock price of $25 per share. You Delta-hedge your position initially, but hten do Not rebalance for 10 days. If the stock price goes up to $26 after 10 days:

1. How many more shares you need to buy to continue the Delta-Hedge?

2. How much money did you make/lose by not rebalancing for 10 days?

Assume r=0.04, 365 days in a year and all rates are annual

Reference no: EM13612738

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