Harbor – UCLA Medical Center Options and Greeks Question Discussion
1. A portfolio manager wants to hedge his stock portfolio against changes in stock prices. Construct a strategy using options so that changes in the portfolio value are limited in both directions. What is the cost of this hedge to the manager?
2.You are long a call option on stock ABC. You have delta-hedged your position. You hear on the radio that the CEO of ABC has been arrested for running a massive Ponzi scheme. The stock price of ABC drops. Explain(qualitatively) how you would adjust your hedge.