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g Delta of a call option is 0.85. How many units of the underlying stock should you hold to hedge a short position in 100 call option contracts

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Answer: a.85,000

Explanation:

When using Delta to determine how many units of the underlying stock one should hold to hedge a short position, the following formula is used;

= Delta * No. of positions

= 0.85 * ( 100 * 100)

= 8,500

8,500 units of the underlying stock should be held to hedge a short position in 100 call option contracts with a contract multiplier of 100.

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