A stock price is currently $100. Over each of the next two six-month periods, it is expected to go up by 10% or down by 10%. The risk-free interest rate is 10% per year with semi-annual compounding.

Based on no arbitrage principle and riskless portfolio we can construct along the above binomial tree, briefly discuss how we can hedge risk if we write a European put option with an exercise price of $101 and 1-year maturity.