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An investment bank operates a derivatives trading desk where a trader manages a portfolio that consists primarily of short option positions. In order to mitigate the risk associated with these short positions, the trader employs a delta hedging strategy. Considering the dynamic nature of this strategy and its implications, which of the following statements correctly describes the interest expense involved in maintaining the delta hedge?
A
1 The cost will be highest when the options are deep out-of-the-money.
B
The cost will be highest when the options are deep in-the-money.
C
The cost will be highest when the options are at-the-money.
D
The cost will be lowest when the options are at-the-money.