You already have a portfolio with a delta of 8500 (portf-8500) and a gamma of 500 (portf=500). There are already options on the market for the same underlying asset with a delta of 0.6 and a gamma of 0.025 (both per unit of the underlying asset). You can also use underlyings. What transactions should be made to achieve a gamma neutral portfolio / strategy? A. You should buy options on 20000 units of the underlying and buy 8500 units of the underlying. B.You should buy options on 20000 units of the underlying and sell 3500 units of the underlying. C.You should sell options on 20000 units of the underlying and buy 3500 units of the underlying. D.You should sell options on 20000 units of the underlying and sell 8500 units of the underlying.

You already have a portfolio with a delta of 8500 (portf-8500) and a gamma of 500 (portf=500). There are already options on the market for the same underlying asset with a delta of 0.6 and a gamma of 0.025 (both per unit of the underlying asset). You can also use underlyings. What transactions should be made to achieve a gamma neutral portfolio / strategy? A. You should buy options on 20000 units of the underlying and buy 8500 units of the underlying. B.You should buy options on 20000 units of the underlying and sell 3500 units of the underlying. C.You should sell options on 20000 units of the underlying and buy 3500 units of the underlying. D.You should sell options on 20000 units of the underlying and sell 8500 units of the underlying.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 13QTD

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Question

You already have a portfolio with a delta of 8500 (portf-8500) and a gamma of

500 (portf=500). There are already options on the market for the same underlying asset with a delta of 0.6 and a gamma of 0.025 (both per unit of the underlying asset). You can also use underlyings. What transactions should be made to achieve a gamma neutral portfolio / strategy?

A. You should buy options on 20000 units of the underlying and buy 8500 units of the underlying.

B.You should buy options on 20000 units of the underlying and sell 3500 units of the underlying.

C.You should sell options on 20000 units of the underlying and buy 3500 units of the underlying.

D.You should sell options on 20000 units of the underlying and sell 8500 units of the underlying.

answer is c i need solution

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