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Assume you purchase 200 shares of stock at $80 per share and wish to hedge part of your position by writing a 100 share option.
Assume you purchase 200 shares of stock at $80 per share and wish to hedge part of your position by writing a 100 share option. The option has a strike price of $75 and a premium of $6. If at the time of expiration, the stock is selling at the following prices ($75, $80, $90) what will be your overall gain or loss? (Show your work).
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