What Is Net Dollar Gain or Cost Required to Create

question 6

Multiple Choice

What is net dollar gain or cost required to create a short put delta hedge against a 100 short put position? Assume puts are priced at $1.98,the delta is 0.489,the stock price is $34.50,and no cost to short stock.

• A) $1,540.50 gain
• B) $1,540.50 cost
• C) $2,319.58 gain
• D) $2,319.58 cost

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Definitions:

Shares

Shares represent the portion of ownership in a company or an investment that entitles the holder to a proportional claim on profits, which may be paid out as dividends if declared.

Unissued Stock

Shares that a company is authorized to issue according to its corporate charter but has not yet issued to shareholders.

Outstanding Bonds

Bonds issued by an entity that are currently not redeemed and are in the hands of investors, indicating debt that still needs to be paid off.

Allocation

The process of distributing resources or assigning tasks among various projects, units, or individuals.