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Payoff with Long position

Identify the trading strategy that will generate the payoffs of taking a long position in a call option within a single-period binomial framework.

  1. Buy h = (c+ + c)/(S+ + S) units of the underlying and financing of –PV(–hS + c)

  2. Buy h = (c+ – c)/(S+ – S) units of the underlying and financing of –PV(–hS + c)

  3. Short sell h = (c+ – c)/(S+ – S) units of the underlying and financing of +PV(–hS + c– )

The answer says at time 0 Buy -C and Buy -hS… should he be writing hS ( to hedge against the buy)?

Pg 382

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Ques is asking us to replicate the pay off of a long call position. We would need to buy a share to replicate long call position and finance it with borrowing. If ques would have ask us to calculate arbitrage profit, what you r saying would have been right.  Hope this helps.

I came across this example as well (Example 1 page 382 Long Call Option Replicated with Underlying and Financing) and I am still trying to get my head around this concept. 

It appears answer A and B are identical. 

I believe what is being asked in my own words “What response below is the equivalent to buying a call option?” 

  1. Buy h = (c+ + c)/(S+ + S) units of the underlying and financing of –PV(–hS + c)

  2. Buy h = (c+ – c)/(S+ – S) units of the underlying and financing of –PV(–hS + c)

  3. Short sell h = (c+ – c)/(S+ – S) units of the underlying and financing of +PV(–hS + c– )

More or less just trying to talk this one through and see if I can better understand. 

What is the difference between response A and B in the above question?