Consider the following four European options (A, B, C and D) on a stock. Delta Gamma...

 

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Consider the following four European options (A, B, C and D) on a stock. Delta Gamma Vega Strike price Call option A 0.6 0.5 0.7 $100 Call option B 0.5 0.7 1.1 $200 Put option C -0.2 0.9 2.0 $100 Put option D -0.4 1.0 1.4 $200 A) Use one unit of call option A and X units of put option C to construct a delta-neutral option portfolio. What is X? What are the delta-neutral option portfolio's Gamma and Vega? (1,5 marks) B) Use call option A and put option C to construct a straddle. What are the straddle's Delta, Gamma and Vega? (1.5 marks) C) A trader constructs a trading strategy that longs a put option C and shorts a put option D. In what scenario(s) will this trading strategy generate 0 payoff? (1 mark) Consider the following four European options (A, B, C and D) on a stock. Delta Gamma Vega Strike price Call option A 0.6 0.5 0.7 $100 Call option B 0.5 0.7 1.1 $200 Put option C -0.2 0.9 2.0 $100 Put option D -0.4 1.0 1.4 $200 A) Use one unit of call option A and X units of put option C to construct a delta-neutral option portfolio. What is X? What are the delta-neutral option portfolio's Gamma and Vega? (1,5 marks) B) Use call option A and put option C to construct a straddle. What are the straddle's Delta, Gamma and Vega? (1.5 marks) C) A trader constructs a trading strategy that longs a put option C and shorts a put option D. In what scenario(s) will this trading strategy generate 0 payoff? (1 mark)