QUESTION 15 Suppose a portfolio is delta-neutral and has a gamma of -3200. A...
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Finance
QUESTION 15
Suppose a portfolio is delta-neutral and has a gamma of -3200. A call option trades with a delta of 0.5 and a gamma of 0.8. You buy this option to gamma-hedge.
How many shares of stock do you need to buy (sell) to delta-hedge your portfolio after you added the option?
a.
Sell 2000 shares
b.
Buy 2000 shares
c.
Buy 5000 shares
d.
Sell 5000 shares
QUESTION 16
To hedge a short position in several call option contracts, a trader needs to:
a.
Short as many shares of the underlying stock as the delta of option position
b.
Buy as many shares of the underlying stock as the delta of option position
c.
Buy as many shares of the underlying stock as the number of option contracts
d.
Short as many shares of the underlying stock as the number of option contracts
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