You are a trader in IBM options for an investment bank. Your position is long 100 of the Jan 200 calls and that option has the following greeks: delta = .35, gamma = 0, vega = $1.68 IBM stock is currently at $195. a) (1) if you wanted to hedge the vega risk of the position, which of the following trades would help to accomplish that goal? i) ii) iii) iv) buy 1680 shares of IBM stock sell any IBM options that totaled $1.68 of vega c. sell 1680 shares of IBM stock sell an IBM option with .35 delta none of the above
You are a trader in IBM options for an investment bank. Your position is long 100 of the Jan 200 calls and that option has the following greeks: delta = .35, gamma = 0, vega = $1.68 IBM stock is currently at $195. a) (1) if you wanted to hedge the vega risk of the position, which of the following trades would help to accomplish that goal? i) ii) iii) iv) buy 1680 shares of IBM stock sell any IBM options that totaled $1.68 of vega c. sell 1680 shares of IBM stock sell an IBM option with .35 delta none of the above
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:You are a trader in IBM options for an investment bank. Your position is long 100 of the
Jan 200 calls and that option has the following greeks: delta = .35, gamma = 0, vega =
$1.68 IBM stock is currently at $195.
a) (1) if you wanted to hedge the vega risk of the position, which of the following
trades would help to accomplish that goal?
i)
ii)
iii)
iv)
buy 1680 shares of IBM stock
sell any IBM options that totaled $1.68 of vega c. sell 1680 shares of
IBM stock
sell an IBM option with .35 delta
none of the above
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