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You are worried about the market and are thinking of hedging your gift from Uncle Norbert with stock options. 

 

Take hypothetical positions going short on a call and long on a put to hedge your gift.  Using Excel, graph the value of the gift for each of your hedging choices for possible closing prices at expiration.  The horizontal axis should represent the possible prices in November and the vertical axis should represent the value of the gift for each hedging choice: remaining unhedged, selling a call, or buying a put.  Label everything (axes, strike prices, premiums, etc.)

 

 

You must also decide whether or not to hedge; choose one of the three positions and justify your choice.  Include a discussion that explains your choice and why you did not choose the other two.  Your discussion should include your expectation of the price at expiration and the advantages and disadvantages of each position with regard to cash inflow and risk.  Also include an updated graph from Homework #1