You Are Long a Portfolio of Vanilla Call Options

question 35

Multiple Choice

You are long a portfolio of vanilla call options.Which of the following will help you hedge away your theta risk?

• A)Buying a portfolio of in-the-money cash-or-nothing call options.
• B)Buying a portfolio of out-of-the money cash-or-nothing call options.
• C)Buying a portfolio of in-the-money vanilla call options.
• D)Buying a portfolio of out-of-the money vanilla call options.

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Definitions:

Price Elasticity

A measure of how much the demand for a product changes in response to a change in price, indicating the sensitivity of consumers to price changes.

Product Differentiation

The process through which companies distinguish their products or services from those of competitors, through attributes like quality, design, or branding.

Competitors

Companies or entities that are in the same industry and compete against each other for market share by offering similar products or services.

Demand Curve

A graphical representation of the relationship between the price of a good or service and the quantity demanded by consumers, typically downward sloping.