You are interested in purchasing a straddle on TSLA stock but arent sure which strike price is the best value. Assume that todays stock price S0is 1000, and you can model TSLA shares with a 3-period binomial model with the following characteristics: At each time interval, the stock can go up by a factor of 1.25 or down by a factor of 0.95. The interest rate is 1% per period. You can choose either the strike of 990 or 1100 (but you have to buy a call and put at the same strike)

Question x.1- Calculate the Black-Scholes Value for the call option.

Question x.2- If this was an American Option instead of European style, would it be worth more, less, or the same?

Question x.3- You noticed that the market price for the call option is significantly higher than what you calculated. Assuming your inputs are accurate based on historical information, what does this imply about the markets estimation of future volatility for the stock?

Question x.4- If you wanted to form a delta-neutral portfolio that involved selling the call option (as you perceive it is too expensive), what position would you need to take in the underlying stock in order to have no exposure to the underlying stock change? Your answer should be a number of shares (and long or short).