Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A portfolio is short 1000 call options on stock A with delta = .5 and gamma = 1 and short 500 call options on the

A portfolio is short 1000 call options on stock A with delta = .5 and gamma = 1 and short 500 call options on the stock A with delta = .6 and gamma = 2. A third option had delta = .2 and gamma = 1.

a. What is the delta of the portfolio

b. What is the gamma of the portfolio?

c. What position in the third option will make the portfolio gamma neutral?

d. What position in stock A will then make the portfolio delta and gamma neutral?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Foundations Of Financial Management

Authors: Stanley B. Block, Geoffrey A. Hirt, Bartley R. Danielsen

13th Edition

0073382388, 978-0073382388

More Books

Students also viewed these Finance questions