The Current Price of a Non-Dividend-Paying Stock Is $40

question 8

Multiple Choice

The current price of a non-dividend-paying stock is $40.Over the next year it is expected to rise to $42 or fall to $37.An investor buys put options with a strike price of $41.
-Which of the following is necessary to hedge the position?

• A)Buy 0.2 shares for each option purchased
• B)Sell 0.2 shares for each option purchased
• C)Buy 0.8 shares for each option purchased
• D)Sell 0.8 shares for each option purchased

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