Question

If you have a stock option portfolio with a gamma position of 10 and your delta position is 100, what is your delta position when the portfolio declines by from $100 to $99. Please enter your answer as a number with no decimal places or a dollar sign.

Answer 1

Ans) Gamma position = 10

Delta position = 100

To find the  delta position when the portfolio delines from $100 to $99 ,firstly we need to understand the term delta  which means the rate of change of the price of the option with respect to a change in price of the underlying stock. Delta neutral trading strategies combines stocks (or futures) with options or option with option in such a way that the sum of all the deltas in the trade equals zero. Gamma is expressed as a change in delta per one point change in the price of the underlying. For example in the above question the underlying decline in the portfolio from 100 to 99 that is by 100-99 = $ 1

then the delta position = Delta position -Gamma position ( when there is decline in underlying)

= 100-10 = $90