Part IV HEDGING POSITIONS IN OPTIONS Answer question #29 based on the following information A portolio manager has the following portfolio of over-the-counter options on a stock: Type Position Option Delta Opt. Gamma Option Vega Call - 1000 1 0.50 2.2 1.8 Call -500 0.80 0.6 0.2 Put -2000 -0.40 1.3 0.7 Call 1.4 0.70 -500 1.8 An exchange traded option on this stock has become available which has a delta of 0.6, a gamma of 1.5, and a vega of 0.8. 29. What positions in the exchange traded option and in the stock would make the portfolio both gamma neutral and delta neutral. a. Buy 200 exchange traded options and short 195 shares of stock b. Write 200 exchange traded options and buy 195 shares of stock c. Buy 4000 exchange traded options and short 1950 shares of stock d. Write 4000 exchange traded options and buy 1950 shares of stock e. None of the above 30. Which of the following statements about gamma is false? a. A portfolio's gamma measures the rate of change of the portfolio's delta with respect to the price of the underlying asset. b. It is risky not to change a delta-neutral portfolio rather frequently if gamma is large. c. The gamma of a portfolio can be modified by adding stock to the portfolio. d. The gamma of a portfolio can be modified by adding a position in the traded option to the portfolio. e. None of the above statements is false