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A bank has a short position in 1,000 options on XYZ stock. Each option has delta of 0.45 and a gamma of 5. (a) What

A bank has a short position in 1,000 options on XYZ stock. Each option has delta of 0.45 and a gamma of 5.

(a) What is the delta of the bank position? How many XYZ shares are needed for a delta-neutral position?

(b) A traded option on XYZ stock (Option 1) has a delta of 0.6, and a gamma of 0.5. How can the bank position be made delta and gamma neutral?

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