Suppose that call options on ExxonMobil stock with time to expiration 3 months and strike...
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Finance
Suppose that call options on ExxonMobil stock with time to expiration 3 months and strike price $90 are selling at an implied volatility of 30%. ExxonMobil stock price is $90 per share, and the risk-free rate is 4%.
a. If you believe the true volatility of the stock is 32%, would you want to buy or sell call options?
multiple choice
Buy call options
Sell call options
b. Now you want to hedge your option position against changes in the stock price. Find the hedge ratio (Hint: Use the Black-Scholes model).
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