Problem  A bank has sold USD 300,000 of call options; with strike price of 50 on 100,000 shares currently trading at 49.5.How should the bank do delt
{"Image DocumentName": "Problem", "Image ImageDescription": "Suppose an existing short option position is delta neutral and has a gamma of \uff0d6000. Here, gamma is negative because we have sold options. Assume there exists a traded option with a delta of 0.6 and gamma of Create a gamma and delta neutral position. Solution. To gamma hedge, we must buy 6000/1.25 = 4800 options. Then we must sell (4800) (.6) = 2880 shares to maintain a gamma neutral and original delta neutral position. 11.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}