You Are Long a Portfolio of Vanilla Call Options

question 4

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:

Strecker Synthesis

A chemical reaction for synthesizing amino acids by reacting an aldehyde with ammonium chloride and potassium cyanide, followed by hydrolysis.

Racemic Alanine

A mixture of equal parts of the D- and L-enantiomers of alanine, making it optically inactive due to the internal compensation of optical activity.

Acetaldehyde

A volatile, colorless, and flammable liquid organic compound, used as an intermediate in the synthesis of various chemicals.

3-Methylthiopropanal

An organic compound characterized by a three-carbon aldehyde functional group attached to a sulfur atom-containing methyl group.