Calculate the initial value of the portfolio

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Reference no: EM131623822

A call option with a $1.75 premium has a delta of 0.7 and 30 days to maturity. A dealer sells 100 contracts (=10,000 calls), and wants to delta hedge by purchasing X shares of the stock at $100 per share. Show work.

a) Calculate X

b) Calculate the initial value of the portfolio

c) Calculate the portfolio value a day later if the stock price remains at $100 and the call price drops to $1.70.

Reference no: EM131623822

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