You own 1,200 shares of Banner Co.stock that is currently priced at $42 a share.Given this price,the option delta for a $40 call option on this stock is .664.How many $40 call options do you need to hedge against a -$1 change in the price of the stock?
A)buy 1,613 options
B)buy 1,713 options
C)buy 1,8.7 options
D)write 1,713 options
E)write 1,807 options

Question

Quizplus · Accepted Answer

To hedge against a -$1 change in the stock price, you need to write options. The number of options needed is calculated by dividing the number of shares by the option delta: 1,200 / 0.664 = 1,807 options.

You Own 1,200 Shares of Banner Co