Question
Consider again the situation in Problem 19.24. Suppose that a second traded option with a delta of 0.1 , a gamma of 0.5 , and a vega of 0.6 is available. How could the portfolio be made delta, gamma, and vega neutral?
Step 1
Since the first option has a delta of 0.3 and the second option has a delta of 0.1, we can buy 2 units of the second option to offset the delta of the first option. This would result in a delta of (0.3 - 2*0.1) = 0, making the portfolio delta neutral. To make the Show more…
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