26. A stock is currently trading at 55. You hold a portfolio of the following instruments:
You are given the following information:
Instrument | Price | Delta | Gamma | Vega | Theta | Rho |
Call with K = 50 | 6.321 | 0.823 | 0.038 | 7.152 | −5.522 | 9.730 |
Put with K = 50 | 0.700 | −0.177 | 0.038 | 7.152 | −3.053 | −2.615 |
Call with K = 55 | 3.079 | 0.565 | 0.057 | 10.827 | −6.812 | 6.993 |
Put with K = 55 | 2.396 | −0.435 | 0.057 | 10.827 | −4.096 | −6.586 |
Call with K = 60 | 1.210 | 0.297 | 0.050 | 9.515 | −5.513 | 3.779 |
Put with K = 60 | 5.465 | −0.703 | 0.050 | 9.515 | −2.551 | −11.035 |
(a) What is the current value of your portfolio?
(b) What is the delta of your portfolio? the gamma? the vega? the theta? the rho?
(c) Suppose you want to make your portfolio gamma neutral. What is the cost of achieving this using the 55-strike call? What is the theta of your new position?
(d) What is the cost if you used the 55-strike put? What is the theta of the new position?
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