3.1 I need to hedge a short position in 100 call option contracts. Each contract is on 100 shares of stock XYZ. At t=0 (initially) I estimated the option delta to be 0.25. Which of the following is true?

a) I need to buy 25 shares of stock today to establish the hedge

b) I need to short 2500 shares of stock today to establish the hedge

c) This hedge will need to be dynamically adjusted through buying or selling shares as option delta fluctuates over time

3.2I need to hedge a short position in 100 call option contracts. Each contract is on 100 shares of stock XYZ. At t=0 (initially) I estimated the option delta to be 0.25 and I bought 2500 shares of XYZ. At t=1 (one day later) I re-estimated the delta to be 0.30. My action at t=1:

a) Do nothing

b) Buy an additional 3,000 shares of XYZ with borrowed funds

c) Sell 500 shares and invest the proceeds in the risk-free asset

d) Buy an additional 500 shares with borrowed funds

3.3The following statement is true regarding delta of a call option:

a) delta of a call option is negative

b) delta of a call option does not change with the price of the underlying asset

c) delta of a call option measures a percentage change in the option price per 1% change in the underlying asset price

d) none of the above