You already have a portfolio with a delta of 8500 (Aportf-8500) and a gamma of 500...

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You already have a portfolio with a delta of 8500 (Aportf-8500) and a gamma of 500 (portf-500). There are already options on the market for the same underlying asset with a delta of 0.6 and a gamma of 0.025 (both per unit of the underlying asset). You can also use underlyings. What transactions should be made to achieve a gamma neutral portfolio / strategy? a) You should sell options on 20000 units of the underlying and buy 3500 units of the underlying. b) You should sell options on 20000 units of the underlying and sell 8500 units of the underlying. c) You should buy options on 20000 units of the underlying and buy 8500 units of the underlying. d) You should buy options on 20000 units of the underlying and sell 3500 units of the underlying. You already have a portfolio with a delta of 8500 (Aportf-8500) and a gamma of 500 (portf-500). There are already options on the market for the same underlying asset with a delta of 0.6 and a gamma of 0.025 (both per unit of the underlying asset). You can also use underlyings. What transactions should be made to achieve a gamma neutral portfolio / strategy? a) You should sell options on 20000 units of the underlying and buy 3500 units of the underlying. b) You should sell options on 20000 units of the underlying and sell 8500 units of the underlying. c) You should buy options on 20000 units of the underlying and buy 8500 units of the underlying. d) You should buy options on 20000 units of the underlying and sell 3500 units of the underlying.

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The detailed answer for the above question is provided below To achieve a gammaneutral portfoliostra... View the full answer