Reference no: EM133075651

Current underlying price at 100, and you expect price at expiration follows uniform distribution with mean absolute deviation of 20.

You short 10 PUTs with strike at 90.

• For the hedged put position (short 10 puts, hedged with shares), what is the PnL from (starting) delta, and from gamma when underlying moves from 100 to 80, respectively?
• Calculate option price when stock moves $80. How much of the total PnL of Q4d is from option position, and how much is from the stock position?
• If underlying moves down from 100 to 80, what is the new delta at stock price of 80 for your overall position based on gamma? If you need to re-hedge to flatten delta with underlying shares, what trade do you need to do in the shares to flatten the delta?
• What is the PnL from the delta and gamma when underlying moves from 100 to 120, respectively?
• For Q4g, how much of the total PnL is from option position, and how much is stocks, when underlying moves from 100 to 120?
• If underlying moves up from 100 to 120, If you need to re-hedge to flatten delta with underlying shares, what trade do you need to do in the shares?