Question
The investor owns 1,000 shares of stock but anticipates its price may decline. To reduce the risk of loss, how many call options must be
The investor owns 1,000 shares of stock but anticipates its price may decline. To reduce the risk of loss, how many call options must be sold if the hedge ratio is 0.7 (be aware that options are sold in 100 blocks) ?
a, Sell approximately 1000 options
b.Sell approximately 100 options
c. Sell about 14 options
d.sell approximately 70 options
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Financial Theory and Corporate Policy
Authors: Thomas E. Copeland, J. Fred Weston, Kuldeep Shastri
4th edition
321127218, 978-0321179548, 321179544, 978-0321127211
