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:

Mean

The average of a set of numerical values, calculated by dividing the sum of the values by the number of values.

Normal Distribution

A bell-shaped frequency distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean.

Standard Deviation

A statistic that measures the dispersion or spread of a set of data points relative to its mean.

Mean

The average of a set of numbers, calculated by dividing the sum of these numbers by the count of the numbers.