Question: Consider a call and a put on the same non dividend paying stock. A trader just sold 100 CBOE of the calls and 100 CBOE

Consider a call and a put on the same non dividend paying stock. A trader just sold 100 CBOE of the calls and 100 CBOE puts. Every option covers 100 shares and all the calls and the puts are for the same strike price, K and the same expiration date, T.

Given for the calls: Delta(c) = .6750; Gamma(c) = .0500.

8.1 Calculate the Delta and the Gamma of the position of the trader.

8.2 Give an interpretation of the Delta of the position.

8.3 The trader holds the above position. Calculate the number of share to hold long or short so to create a new Delta - neutral position for the trader.

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