Question
A trader uses a stop-loss strategy to hedge a short position in a three-month call option with a strike price of 0.7000 on an exchange
A trader uses a stop-loss strategy to hedge a short position in a three-month call option with a strike price of 0.7000 on an exchange rate. The trader covers the option when the exchange rate is 0.7005 and assumes a naked position when the exchange rate is 0.6995. The value of the option is 0.1. Estimate the expected number of times the trader covers the position
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Introduction To Corporate Finance
Authors: Laurence Booth, Sean Cleary
3rd Edition
978-1118300763, 1118300769
