This is regarding R29 EOC 18
Comment #2 : “The Sure covered call position provides a maximum per share gain of $2.20 and a breakeven underlying price at expiration of $32.80.”
call is out of money.
If an options dealer takes the other side of the Sure option position, the dealer’s initial option delta and hedging transaction, respectively, will be:
Dealer’s Initial Option Delta Dealer’s Hedging Transaction A Negative Buy the underlying B Positive Buy the underlying C Positive Sell the underlying
Answer is C.
I am confused if dealer is buying the call, does he need to hedge the transaction? (isn’t he buying the option?)