An investor just created the following portfolio (Portfolio P) of options on the XYZ stock. All options have the same maturity: Jan. 15, 2021. Assume the current stock price of XYZ stock is $51 a share.

(a) How many shares of XYZ stock is Portfolio P equivalent to in terms of its risk exposure?

Hint: Find the (delta) of Portfolio P to answer.

(b) Assume that the stock price of XYZ increases by $0.75 a few minutes after the Portfolio P is created. Estimate the percentage change in the value of Portfolio P after that price change.

(c) Calculate the Gain/Loss of Portfolio P depending on the following closing stock prices of XYZ on Jan. 15, 2021.

(d) What is the maximum loss possible on Jan. 15, 2021?

Strike Price ($) Number of options in Portfolio P -600 A (delta) (per 1 unit) Security Price ($ per 1 unit) 55 0.42 0.9 52.50 +900 0.50 1.7 Call Option_A Call Option_B Call Option_C Put Option_D 50 -600 0.68 2.9 47.50 -500 -0.44 1.4 St = $45 ST = = $49 St = $53 St= = $60 Gain/Loss of Portfolio P on Jan. 15, 2021 Strike Price ($) Number of options in Portfolio P -600 A (delta) (per 1 unit) Security Price ($ per 1 unit) 55 0.42 0.9 52.50 +900 0.50 1.7 Call Option_A Call Option_B Call Option_C Put Option_D 50 -600 0.68 2.9 47.50 -500 -0.44 1.4 St = $45 ST = = $49 St = $53 St= = $60 Gain/Loss of Portfolio P on Jan. 15, 2021