4) Suppose that stock XYZ is trading at $100. An investor is considering buying an atm call which is trading at 20% volatility, giving a price of $6.1. According to a vol forecasting model used by the investor this price appears to be expensive. Therefore, the investor decides to sell the call and hedge the directionality of the position. Assuming that the investor can trade fractional amounts of stock and that: A=.5 and T = .03 a) Describe the portfolio to be held by the investor. b) If right after inception XYZ trades at $100.5, how would you estimate the new value of this portfolio? c) With XYZ trading at $100.5 the portfolio is not delta neutral. What trades should the investor do to rebalance the hedge? 4) Suppose that stock XYZ is trading at $100. An investor is considering buying an atm call which is trading at 20% volatility, giving a price of $6.1. According to a vol forecasting model used by the investor this price appears to be expensive. Therefore, the investor decides to sell the call and hedge the directionality of the position. Assuming that the investor can trade fractional amounts of stock and that: A=.5 and T = .03 a) Describe the portfolio to be held by the investor. b) If right after inception XYZ trades at $100.5, how would you estimate the new value of this portfolio? c) With XYZ trading at $100.5 the portfolio is not delta neutral. What trades should the investor do to rebalance the hedge