Question
1.Suppose a portfolio is delta-neutral and has a gamma of -5600. A call option trades with a delta of 0.5 and a gamma of 0.8.
1.Suppose a portfolio is delta-neutral and has a gamma of -5600. A call option trades with a delta of 0.5 and a gamma of 0.8. You buy this option to gamma-hedge.
How many shares of stock do you need to buy (sell) to delta-hedge your portfolio after you added the option?
| a. | Buy 3500 shares | |
| b. | Sell 5000 shares | |
| c. | Sell 3500 shares | |
| d. | Buy 5000 shares |
2.
Trading shares of the underlying stock will affect
| a. | the vega of the portfolio
| |
| b. | the delta of a portfolio | |
| c. | the gamma of the portfolio
|
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Practical Financial Management
Authors: William R. Lasher
8th edition
1305637542, 978-1305887237, 1305887239, 978-1305637542
