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Suppose the S&R index price is $41. The index volatility is 30%. There is no dividend from the index. The annual interest rate is 8%.
Suppose the S&R index price is $41. The index volatility is 30%. There is no dividend from the index. The annual interest rate is 8%. Consider 40 strike put with 180 days to expiration. W (a) What is the put option premium and the put delta? Just write down the answer. You don't have to explain how to obtain the values. (3 points) (b) Suppose you short 100 put options. What is your overnight profit of the delta hedging if the the stock price becomes $40 tomorrow? Briefly explain how to obtain the value. (7 points)
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