Lets assume you would like to generate a riskless (hedge) portfolio with a call option. You have following information:

• Current price of stock is $40.
• At the end of a year, the price would change to either $50 or $32.
• A call option with the stock has an exercise price of $35 with 0.5 year maturity.
• A riskless security had 8% return.

To generate a riskless (hedge) portfolio, how many stocks do you need to buy?

Hint: Binomial approach for option valuation.