Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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A trader working for a financial institution sells 200 PUT option contracts (i.e. 20,000 options) on a certain stock. At the time of the initial trade, the option price is $10, and the corresponding delta is -0.46.
At time 0, the trader neutralizes the delta of the options through either the purchase/sale of shares.
Over the course of the next week, the stock price moves, resulting in a new delta of -0.54.
How many shares should the trader buy to maintain a delta-neutral position?
If the answer requires selling/shorting shares, enter a negative number for the number of shares to purchase.
(required precision 0.01 +/- 0.01)
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