Black-scholes-merton formula

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Suppose you hold LLL employee stock options representing options to buy 11,600 shares of LLL stock. LLL accountants estimated the value of these options using the Black-Scholes-Merton formula and the following assumptions:

S = current stock price = $21.99
K = option strike price = $22.5
r = risk-free interest rate = .046
σ = stock volatility = .22
T = time to expiration = 3.5 years

You wish to hedge your position by buying put options with three-month expirations and a $25 strike price. How many put option contracts are required? (Note that such a trade may not be permitted by the covenants of many ESO plans. Even if the trade were permitted, it could be considered unethical.) (Do not round intermediate calculations. Round your answer to the nearest whole number.)

Reference no: EM131044440

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