Portfolio A consists of 500 shares of stock and 500 calls on that stock. Portfolio B consists of 800 shares of stock. The call delta is 0.6. Which portfolio has a higher dollar exposure to a change in stock price?
A. Portfolio B
B. Portfolio A
C. The two portfolios have the same exposure.
D. Portfolio A if the stock price increases and portfolio B if it decreases
E. Portfolio B if the stock price increases and portfolio A if it decreases
C. The two portfolios have the same exposure.
500 calls (0.6) = 300 shares + 500 shares = 800 shares; 800 shares = 800 shares.
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