You Own 5,000 Shares of Miller Stock, Which Is Currently

question 59

Multiple Choice

You own 5,000 shares of Miller stock, which is currently, valued at $37 a share. The $40 put has a premium of $2.30 and a put delta of −.25. What position should you take in $40 put contracts to hedge your stock against a $1 decrease in price?

• A)buy 200 contracts
• B)buy 1,200 contracts
• C)buy 20,000 contracts
• D)write 200 contracts
• E)write 1,200 contracts

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Definitions:

CPI

A gauge of the average price levels for a mix of consumer services and products like medical care, transportation, and food, the Consumer Price Index assesses this through a weighted average.

Deflation

A decrease in the general price level of goods and services in an economy over time.

European Nations

Countries located in the continent of Europe, each with its own government, culture, and economy.

Booming Economy

An economic state characterized by rapid growth, increased spending, and low unemployment.