Question
A portfolio manager has the following portfolio of options of a stock. TYPE POSITION DELTA OF OPTION GAMMA OF OPTION CALL -1000 0.50 1.8 CALL
A portfolio manager has the following portfolio of options of a stock.
TYPE POSITION DELTA OF OPTION GAMMA OF OPTION
CALL -1000 0.50 1.8
CALL -500 0.80 0.2
PUT -2000 -0.40 0.7
CALL -500 0.70 1.4
A traded option is available with delta of 0.6 and a gamma of 0.8.
What position in this traded option and the portfolio would make the combined portfolio both delta neutral and gamma neutral?
| Long 5,000 calls and sell 2,550 shares of stock
| ||
| Long 4,000 calls and sell 1,950 shares of stock
| ||
| Long 3,000 calls and sell 1,750 shares of stock
| ||
| Long 2,000 calls and sell 1,550 shares of stock |
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