Question

How would you delta hedge a deeply “in-the-money” short put option? A. Go short of the...

How would you delta hedge a deeply “in-the-money” short put option?

A. Go short of the underlying commodity equal to 50% of the size of the option contract

B. Go long of the underlying commodity equal to 50% of the size of the option contract

C. Go long of the underlying commodity equal to more than 50% of the full size of the option contract

D. Go short of the underlying commodity equal to more than 5O% of the full size of the option contract

Homework Answers

Answer #1

Proper solution is given.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
How would you delta hedge an ‘at-the-money’ long call option? A. Go short of the underlying...
How would you delta hedge an ‘at-the-money’ long call option? A. Go short of the underlying commodity equal to 50% of the size of the option contract B. Go long of the underlying commodity equal to 50% of the size of the option contract C. Go long of the underlying commodity equal to the full size of the option contract D. Go short of the underlying commodity equal to the full size of the option contract
A trader uses delta hedging strategy to hedge a portfolio of short positions in call option...
A trader uses delta hedging strategy to hedge a portfolio of short positions in call option on Apple Computer stocks. The trader sells 50 call option contracts (1 contract controls 100 shares) on Apple stock. The option price is $5, the stock price is $230, and the option’s delta is 0.8. a. Does the trade short or long the stock to create a delta-neutral position? (Sample answer: long; or short) b. How many shares does the trader need to create...
3.1 Dynamically hedging a short position in a call option: a. Is guaranteed to save you...
3.1 Dynamically hedging a short position in a call option: a. Is guaranteed to save you money b. Results in a reduced volatility of the gain / loss c. Is more likely to save you money when the option expires out-of-the-money 3.2 Which statement is correct regarding the delta of a put option? a. Delta is positive b. In absolute value, delta < 1 c. Delta doesn’t change with the underlying stock price d. Delta is higher in absolute value...
You are short a put on ABC stock and have delta-hedged yourself using the stock. The...
You are short a put on ABC stock and have delta-hedged yourself using the stock. The delta of the put is -0.71 and the gamma of the put is +0.04 . If the price of the underlying registers an increase of $0.50, to maintain your delta-hedge, you must (a) Sell 0.04 units of the stock. (b) Buy 0.04 units of the stock. (c) Sell 0.02 units of the stock. (d) Buy 0.02 units of the stock. (e) None of the...
If you delta hedge short put position when market oscillates do you “buy high sell low”...
If you delta hedge short put position when market oscillates do you “buy high sell low” stock or do you “sell high buy low” stock?
You want to use an investment strategy by selling a call option and a put option....
You want to use an investment strategy by selling a call option and a put option. Answer the next three questions using the following information. Sell a call option with an exercise price of $1.54 for a premium of $0.03. Sell a put option with an exercise price of $1.54 for a premium of $0.03. A. this type of strategy is called a: a. long butterfly b. short butterfly c. long straddle d. short straddle B.this strategy would be profitable...
1. In the money, out of the money. Suppose you purchased a two-month put option on...
1. In the money, out of the money. Suppose you purchased a two-month put option on 1,000 shares of a company’s stock with a strike price of $65/share. a. The current market value of the stock is $70/share. What is the intrinsic value of your option? b. In the first month, the maximum price of stock was $72/share and the minimum price of the stock was $68/share. For the first month, were you in the money, out of the money,...
How would you use option Greeks to calculate your delta portfolio exposure? If you sell an...
How would you use option Greeks to calculate your delta portfolio exposure? If you sell an overpriced option and hedge your delta exposure, what is the Gamma of your portfolio?
If you combine a long stock position with buying an at the money put option the...
If you combine a long stock position with buying an at the money put option the resulting net payoff profile will resemble the payoff profile of a _______. long call short call short put long put
Question 45 The sale of a put option would be considered to be fully covered when:...
Question 45 The sale of a put option would be considered to be fully covered when: The account is long 100 shares of the underlying stock Cash equal to the exercise price is deposited in the account A put with a higher exercise price is long in the account The account is also short 100 shares of the underlying stock more than one of the above is correct Question 6 A customer buys 1 XYZ Jan 65 put at 3.50...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT