A Position in Options on a Particular Stock Has a Delta

question 6

Multiple Choice

A position in options on a particular stock has a delta of zero and a gamma of 4.The stock price is 10.Which of the following is the approximate relation between the change in the portfolio value in one day,dP,and the return on the stock,dx

• A) dP = 4 times the square of dx
• B) dP = 2 times the square of dx
• C) dP = 20 times the square of dx
• D) dP = 200 times the square of dx

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