Suppose that a second traded option with a delta of 0.1
Problem 17.25.
Consider again the situation in Problem 17.24. 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?
Hint
Let w1be the position in the first traded option and w2 be the position in the second traded option. We require: 6,000 = 1.5w1 + 0.5w24,000 = 0.8w1 + 0.6w2The solution to these equations can easily be seen to be w1 = 3,200, w2 = 2,400. ...