2012 CFAI morning exam q 9:

Part A ii asks for how many # of shares should he trade??? Can somebody clarify what’s going on here?

Help much appreciated.

2012 CFAI morning exam q 9:

Part A ii asks for how many # of shares should he trade??? Can somebody clarify what’s going on here?

Help much appreciated.

Using the same hedging formula, but this time you do not calculate number of option, but number of shares.

To hedge 1 put you need to sell 0.3088 shares

=>To hedge 2000 puts, you need sell 2000*0.3088 = 617.6 shares.

617 is the correct answer the one in the guidline answers is not correct its the amount needed to buy 617 options

Thanks guys so much. I got it now.