Consider a stock paying continous dividens of 1%. Assume r=0.06 \(\sigma=0.32\) stock price of s(0)=33.
a) You sell 100 Calls with strike K=35 and expiration in 68 days (assume 365 days in a year). You also constuct a delta-hedge to manage your risk. If tomorrow (1 day after) stock price rises to $34.50. Find your net profit/loss from your hedged portfolio.
b) Repeat this problem for the case of selling 100 Puts with strike K=35 and all other parameters staying the same.