Suppose that r = 2%, S 0 = 100, = 20%. Consider the at-the-money straddle that

Suppose that r = 2%, S₀ = 100, σ = 20%. Consider the at-the-money straddle that goes long both a call struck at K = 100 and long a put at the same strike. 

(a) What is the ∆ of the call and the put? What is the overall ∆ of the position? 

(b) What is the Γ of the position? 

(c) What is the vega of the position? Based on the vega, how much would the position increase in value (in dollar terms) if volatility suddenly increased to 21%.

Answer rating: 100% (QA)

a The delta of a call option is positive and the delta of a put option is negative At the money both ... View the full answer