You Are Long a Portfolio of Vanilla Call Options

question 8

Multiple Choice

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

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

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Definitions:

Botanicals

Plant-derived substances used in health foods, supplements, and cosmetics for their potential benefits or therapeutic properties.

Rotenone

A chemical compound derived from certain plants used as an insecticide and piscicide due to its toxicity to mitochondria.

Pyrethrum

A natural insecticide made from the dried flower heads of certain chrysanthemum species, used to control pests.

Herbicide

Chemical substances used to destroy or inhibit the growth of unwanted plants, weeds, or vegetation.