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A. Call option price goes from $2.05 to $1.85 while the underlying stock price decreases from $40 to $38. What is the value of call

A. Call option price goes from $2.05 to $1.85 while the underlying stock price decreases from $40 to $38.

  1. What is the value of call Delta?  
  2. What is the value of put Delta? 
  3. If the price of the stock increases by $1, by approx. how much will call price change? 
  4. If the price of the stock increases by $1, by approx. how much will put price change?
  5. You have 10,000 shares. How many puts are reqd. to be long to hedge the position?


B. Consider the following option strategy - buy stock at $40 and buy a 38 put for $2 and find out the following:

  1. Net cost of position =
  2. Breakeven stock price at expiration =
  3. Maximum gain =
  4. Maximum loss =
  5. Profit/loss at stock price of $45 =


C. Consider the following option strategy - buy stock at $40 and sell a 42 call for $1 and find out the following:

  1. Net cost of position =
  2. Breakeven stock price at expiration =
  3. Maximum gain =
  4. Maximum loss =
  5. Profit/loss at stock price of $55 =

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