You Own 2,000 Shares of ABC Stock That Is Currently

question 54

Multiple Choice

You own 2,000 shares of ABC stock that is currently priced at $27 a share. Given this price, the option delta for a $25 call option on this stock is .718. How many $25 call options do you need to hedge against a -$1 change in the price of the stock?

• A) buy 2,000 options
• B) buy 3,482 options
• C) write 2,000 options
• D) write 2,786 options
• E) write 3,295 options

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Definitions:

Cognitive Ability

The skill to engage in sophisticated mental activities involving logic, memory, comprehension, and finding solutions.

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Standardized tests widely used for college admissions in the United States, assessing reading, writing, and math skills.

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Cognitive Ability

The mental capacity to reason, solve problems, think abstractly, comprehend complex ideas, learn quickly, and learn from experience.