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

---

Definitions:

Superego

A component of Freud's psychoanalytic theory representing the internalized societal and parental standards of right and wrong.

Morality Principle

In psychoanalytic theory, a component of the superego that consists of the internalized standards of right and wrong guiding behavior.

Ego

In psychoanalytic theory, the part of the personality responsible for dealing with reality, balancing the demands of the id and the superego.

Reality Principle

A concept in psychoanalytic theory describing the ability of the ego to assess the external world and act in a manner that is realistic and socially appropriate.