If a trader sells an option at an implied volatility of 10%, and plans to delta hedge it, over the life of the option she hopes realized volatility will be: A. lower than 10% B. if its three month option then she hopes its 10/3 C. higher than 10% D. irrelevant where realized will be

If a trader sells an option at an implied volatility of 10%, and plans to delta hedge it, over the life of the option she hopes realized volatility will be: A. lower than 10% B. if its three month option then she hopes its 10/3 C. higher than 10% D. irrelevant where realized will be

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter2: Fundamental Economic Concepts

Section: Chapter Questions

Problem 6E

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Question

If a trader sells an option at an implied volatility of 10%, and plans to delta hedge it, over the life of the option she hopes realized volatility will be:

A.

lower than 10%

B.

if its three month option then she hopes its 10/3

C.

higher than 10%

D.

irrelevant where realized will be

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