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Suppose you buy a Delta-neutral straddle on a stock (i.e., you buy both a near-the-money call and a near-the-money put with the same time to
Suppose you buy a Delta-neutral straddle on a stock (i.e., you buy both a near-the-money call and a near-the-money put with the same time to maturities), and partially finance this purchase by selling a less expensive Delta-neutral strangle on the same underlying (i.e., you sell both an out-of the-money call and an out-of the-money put, with the same time-to-maturities as you used in the straddle you bought). Then your overall position:
a. | Could have either a positive or negative Gamma. | |
b. | Has a positive Gamma. | |
c. | Has a negative Gamma. | |
d. | Is Gamma-neutral |
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