Question
(m) You are currently managing an options portfolio (the same as the simulator) with delta, cash gamma, vega, and theta of -19.8, $-243,000, $-26,000 and
(m) You are currently managing an options portfolio (the same as the simulator) with delta, cash gamma, vega, and theta of -19.8, $-243,000, $-26,000 and $2,425 respectively, quantify and explain what do these numbers represent? If you wish to decrease your portfolio in order to be delta, gamma, theta and vega neutral, what kind of options trading activities should you undertake? Nominate at least 3 different ways a market maker can do this? (think about the different ways a market maker can engage in trading). Which Greek should be the easiest to make neutral? Why do you think this greek should always be close to neutral? Explain why making the position greek risk neutral does not mean that all risk is 0? (20 marks)
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