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Underlying at $ 1000 and options have 2 weeks left before expiration (10 trading days) Long PUT and short CALL is known as a long
Underlying at $ 1000 and options have 2 weeks left before expiration (10 trading days)
Long PUT and short CALL is known as a long collar position. As an option market-maker you have the following SHORT collar position :
Short 100x put at 980 strike. PUT is priced with an annual iv of 200.
Long 100x call at 1020 strike. Call is priced with an annual iv of 150.
1. What are the deltas for each put and call contract ? What is the total delta for the market maker's entire short collar position ? (4 points
- How do you completely hedge 100 % the delta exposure of the position with underlying shares ? How many shares to long or to short ? (1 point )
- What is the gamma value for each put and call contract ? What is the gamma value for market maker's overall short collar position ( 4 points )?
- What is the daily theta of the short collar position ? ( 1 point )
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