Which of the following statements regarding the goal of a delta neutral portfolio is most accurate One example of a delta neutral portfolio is to combine a a Long position in a stock with a short position in call options so that the value of the portfolio does not change with changes in the value o...

A deltaneutral portfolio can be crea ...

Which of the following statements regarding the goal of a delta-neutral portfolio is most accurate? One example

Question:

Which of the following statements regarding the goal of a delta-neutral is most accurate?
One example of a delta-neutral is to combine a:
a. Long position in a stock with a short position in call options so that the value of the does not change with changes in the value of the stock.
b. Long position in a stock with a short position in a call option so that the value of the changes with changes in the value of the stock.
c. Long position in a stock with a long position in call options so that the value of the does not change with changes in the value of the stock.

Mark Washington, CFA, is an analyst with BIC. One year ago, BIC analysts predicted that the U.S. equity market would most likely experience a slight downturn and suggested delta-hedging the BIC As predicted, the U.S. equity markets did indeed experience a downturn of approximately 4% over a 12-month period. However, performance for BIC was disappointing, lagging its peer group by nearly 10%. Washington has been told to review the options strategy to determine why the hedged did not perform as expected.

Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...