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You are holding call options on an individual stock. The stocks beta is 0.75, and...

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Finance

You are holding call options on an individual stock. The stocks beta is 0.75, and you are concerned that the overall market is about to fall. The stock is currently selling for $5 and you hold 1 million options. The option delta is 0.8.

a. If the stock market index falls by 1%, how much are the stocks on which the options are written would be expected to fall in total value? (Enter your answer in dollar amounts not in percentages)

b. How much are the options you are holding expected to fall in total value (for the same 1% drop in the market index)? (Enter your answer in dollar amounts not in percentages)

c. How much of the market index portfolio must you buy or sell to hedge your market exposure? (Enter your answer in dollar amounts not in percentages)

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