On july 6 of 2012 the price of a stock traded at 16513 per

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On July 6 of 2012, the price of a stock traded at $165.13 per share. Its call option had a strike price of 165 and October 16 maturity date and a premium of $8.13. The continuously compounded risk free rate of return is 5.71% and the standard deviation is 21%. What is the theoretical value of the call (assume a European call). Based on your answer, recommend a riskless strategy. If the stock price decreases by $1, how will the option position offset the loss?

Reference no: EM13363949

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