Question

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?

Answer #1

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.

15.You are discussing dynamic hedging with the chief risk
officer who oversees all nonlinear risk at the enterprise level.
The debate is the incremental value of how often to hedge nonlinear
option greeks under conditions of large market moves when the
Federal Reserve continues to raise rates. Before you can consider
the transactional cost of hedging, you want to consider the
incremental impact of the addition of an option hedge to the
initial gamma and delta of the portfolio. You...

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

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...

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...

What actions are required to both delta-hedge and
gamma-hedge a written option position?
Market makers buy and sell just like anyone else with different
products. Obviously buying low selling high is the goal. This
process is selected and done by demand and supply of the instrument
or product not by personal interest. One way that market makers in
the derivatives market that they can control this risk is by Delta
Hedging. The market maker calculates the purchase of the option...

a) Explain how to calculate the delta
of a portfolio of options (see 17.4 of Hull).
b) Suppose you are long 50 shares of
Tesla stock that you bought at 798. You are also short 100 puts
(=one contract) with a strike of 800 and 100 calls (one contract)
with a strike of 850 that expire on June 19th. You are
given the following information on the deltas of these
instruments:
Position
Quantity
Delta/share
TSLA
50
1
850 Call
-100...

what if the market that a lookback option is overpriced, how
would you take advantage of it to make money?

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...

What is the term structure of interest rates? Which major types
of term structure do you know and what do they mean?
In which units is bond’s duration measured? How can you
interpret bond’s duration?
Interpret the following option greeks’ values for a call
option: delta, gamma, theta, vega, rho

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 13 minutes ago

asked 43 minutes ago

asked 43 minutes ago

asked 51 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago