What trades would be required to make the portfolio delta

Reference no: EM133491623

Case: You are a portfolio manager of a financial institution. One of your portfolios of over-the-counter options has the following characteristics:

Type	Position	Delta of Option	Gamma of Option	Vega of Option
Call	-2,000	0.5	2.2	1.8
Put	2,000	-0.40	1.3	0.7
Call	-1800	0.70	1.8	1.4
Call	-1500	0.8	0.6	0.2

Question: A traded option A is available with a delta of 0.8, a gamma of 1.5, and a vega of 0.6. Suppose that a second traded option B with a delta of 0.1, a gamma of 0.5, and a vega of 0.6 is available.

Using the information above what trades would be required to make the portfolio delta, gamma, and vega neutral?

Reference no: EM133491623

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