A Portfolio of Derivatives on a Stock Has a Delta

question 11

Multiple Choice

A portfolio of derivatives on a stock has a delta of 2400 and a gamma of -10.An option on the stock with a delta of 0.5 and a gamma of 0.04 can be traded.What position in the option is necessary to make the portfolio gamma neutral?

• A) Long position in 250 options
• B) Short position in 250 options
• C) Long position in 20 options
• D) Short position in 20 options

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Definitions:

Modular Design

A design approach that involves creating product components in separate units or modules that can be independently created and then used in different systems.

Customer Needs

The recognized desires or requirements of consumers that drive their purchasing behaviors and decisions.

Modular Design

A design approach that divides a system into smaller parts called modules, which can be independently created, modified, replaced, or exchanged with other modules.