An investor has a portfolio consisting of 100 put options on stock A, with a strike price

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An investor has a portfolio consisting of 100 put options on stock A, with a strike price of 40, and 5 shares of stock A. The investor can write put options on stock A with a strike price of 35. The deltas and gammas of the options are listed below:

Delta Gamma Put (Strike 35) Put (Strike = 40) -0.10 -0.05 0.25 0.50

Which one of the following actions would delta and gamma neutralize this portfolio?

(A) Write 100 put options with a strike price of 35.

(B) Write 50 put options with a strike price of 35.

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Derivative Pricing

ISBN: 9780367734213

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Authors: Ambrose Lo

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Question Posted: Nov 22, 2023 08:17 AM

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An investor has a portfolio consisting of 100 put options on stock A, with a strike price

Question:

Delta Gamma Put (Strike 35) Put (Strike = 40) -0.10 -0.05 0.25 0.50

Step by Step Answer:

E To gammahedge the portfolio we need to sel...View the full answer

Derivative Pricing

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