Option question
Apologies for the newbie question, but I am not very familiary with option hedging.
Say we have 1000 shares of Mastercard currently trading at $345. We want to hedge the whole amount with put options. On Bloomberg, 441 days/90% put strike price ($310) is shown as roughly $26.80 with implied volatility of 29.62. So what would be the (theoretical) premium we have to pay?
- Is it 1000 x 26.80?
- Is it 10 contracts x 26.80?
- Is it something else?
Thanks a lot!
Contracts are for 100 shares, but are quoted on a pershare basis. So it would be
10x contracts
each contract = 100x $26.8
So total would = $26,800
Also note that delta on each contract is like ~-.3, so you're hedging tails for each share, but not the overall delta.
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