Suppose that call options on ExxonMobil stock with time to expiration 3 months and strike price $104 are selling at an implied volatility of 28%. ExxonMobil stock price is $104 per share, and the risk-free rate is 6%. a. If you believe the true volatility of the stock is 30%, would you want to buy or sell call options? Buy call options Sell call options b. Now you want to hedge your option position against changes in the stock price. How many shares of stock will you hold for each option contract purchased or sold? (Round your answer to 4 decimal places.) Answer is complete but not entirely correct. Number of shares 0.5753

Suppose that call options on ExxonMobil stock with time to expiration 3 months and strike price $104 are selling at an implied volatility of 28%. ExxonMobil stock price is $104 per share, and the risk-free rate is 6%. a. If you believe the true volatility of the stock is 30%, would you want to buy or sell call options? Buy call options Sell call options b. Now you want to hedge your option position against changes in the stock price. How many shares of stock will you hold for each option contract purchased or sold? (Round your answer to 4 decimal places.) Answer is complete but not entirely correct. Number of shares 0.5753

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 4MC

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