Question
Suppose a portfolio is delta-neutral and has a gamma of -5600. A call option trades with a delta of 0.5 and a gamma of 0.8.
Suppose a portfolio is delta-neutral and has a gamma of -5600. A call option trades with a delta of 0.5 and a gamma of 0.8. You buy this option to gamma-hedge.
How many shares of stock do you need to buy (sell) to delta-hedge your portfolio after you added the option?
| a. | Sell 3500 shares | |
| b. | Buy 3500 shares | |
| c. | Sell 5000 shares | |
| d. | Buy 5000 shares |
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School Finance Elections
Authors: Don E. Lifto, Bradford J. Senden, Daniel A. Domenech
2nd Edition
