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Need help with this Finance question. Any help would be great! Thanks in advance! 4. You own 100 shares of Google stock (GOOGL) and are

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Need help with this Finance question. Any help would be great! Thanks in advance!

image text in transcribed
4. You own 100 shares of Google stock (GOOGL) and are concerned that the price will go down. You do not want to sell because you have unrecognized capital gains and are in a high tax bracket. Using the BlackScholes model with o = .35, r=.005, t=January 2021 option, K= today's price, and ignoring dividends, answer the following: (a) On an ongoing basis, what portfolio should you construct to offset any loss on the stock with prot from an option? (Hint: consider the delta of the stock which measures how many shares of stock equals the movements in one option). (b) What is the approximate cost per month of maintaining this hedge indenitely? (Hint: what is the cost of the option on an approximately monthly basis) (c) If the stock price moves by $1, what is the change in value of your portfolio (stock plus option)? (d) If the stock price moves by $100, what is the change in value of your portfolio? Why is it different than part (c)

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