Derivative Securities

Tesla stock is traded at $400, and its volatility is 30% per annum. The risk-free rate is 5% per annum (continuously compounded). A trader is considering shorting a 6-month at-themoney European put option on Tesla stock. A) What is the strike price of the put option? (1 mark) B) Use the Black-Scholes-Merton model to calculate the put option price. (1 mark) C) Calculate the delta of this option. (1 mark] D} The trader wants to use option delta to evaluate his exposure on Tesla stock. If put option's delta is -0.1 and contract size is 100 shares per contract, then shorting one put option is approximately equivalent to long or short (choose one) how many Tesla shares":I (2 marks)