Reconsider the determination of the hedge ratio in the two$-$state model where we showed that one$-$third share of stock would hedge one option. The possible end$-$of$-$year stock prices, uS$0=$ $$110($up state$)$ and dS$0=$ $$71($down state$).$

Required:

What would be the call option hedge ratio for each of the following exercise prices: $$110,$ $$95,$ $$90,$ $$71,$ given the possible end$-$of$-$year stock prices, uS$0=$ $$110($up state$)$ and dS$0=$ $$71($down state$)?$

What do you conclude about the hedge ratio as the option becomes progressively more in the money?