Question
Q2. You short 10 straddles with 28 trading days left. Underlying at 100 currently, with annual IV of $30. Rf=0. Q2a. What is the delta
Q2. You short 10 straddles with 28 trading days left. Underlying at 100 currently, with annual IV of $30. Rf=0. Q2a. What is the delta and gamma value of the position?
Q2b. What is the one-day theta value for the position? Is it positive or negative?
Q2c. If underlying goes down by $1 in one day, what is the gamma Pnl, as well as total PnL for the position? (hint: total PnL is the sum of PnL from a. delta; b. gamma; c. theta
Q2d. If underlying goes UP by $5 in one day, what is the gamma Pnl as well as total PnL for the position?
Q2e. What is the delta of the short straddle position based on gamma value from Q2a, after a $10 movement downward? (keep the DTE the same at 28). How do you use underlying shares to flatten your delta (ie re-hedge) after the price movement?
Please show a work
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