SSERG Inc. is a fast-growing global company specialized in FinTech. The current stock price of the company is 150 USD, the simple 5-month risk-free rate is 2.5% (not annualized), and the historical volatility of returns is 50%.

QUESTION:

Given the high volatility of the stock and the recent events in the FinTech area you think that the price of the stock will decrease and decide to invest in options. The only available option on the market is an at-the-money put with a price of 35 USD, maturing in 11 months. Don't forget there is an expected dividend in 2.5 months. Using a two-step binomial model determine the replicating portfolio in the initial node. Should you replicate the option or buy it on the market?