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Acme industries' call options have a strike (exercise) price of $35 per share and 6 months to maturity Acme stock is trading at $30 and
Acme industries' call options have a strike (exercise) price of $35 per share and 6 months to maturity Acme stock is trading at $30 and will either increase to $40 or decrease to $25 over the next 6 months. The nominal risk free rate is 6% per year. Using the binominal option pricing model, calculate the hedge ratio. That is, calculate the number of shares of stock to purchase to hedge when writing 1 call option.
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