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:

Testamentary Trust

A trust that is created according to the instructions left in a deceased person's will and goes into effect upon their death.

Died Intestate

The situation where a person passes away without having made a legal will.

Personal Representative

A personal representative is an individual appointed to administer the estate of a deceased person, managing and distributing the estate's assets according to the will or, if there is no will, in accordance with state laws.

Administrator

The personal representative appointed by a probate court to settle the estate of a deceased person who died intestate (without leaving a valid will).