You have the following market data: PDQ stock price:102 Riskless interest rate (simple interest, i., the Annual Percentage Rate):00% Option…

13. You have the following market data: PDQ stock price:           102

Riskless interest rate (simple interest, i.e., the Annual Percentage Rate):  8.00% Option maturity: 3 months

Volatility: 0.30

Options are all European.

An option is for 1 share. Fractional shares and fractional options can be traded if you want to.

Options data:

Strike   Call price  Call delta  Call Gamma         Put price Put delta Put gamma

95          11                 .75            0.0208              2 1/2            -.25         0.0208

100           8                  .63            0.0247                4                -.37        0.0247

105           6                  .50            0.0261                8                -.50         0.0261

You are on the trading desk of a securities firm and you have just put on the following trade: Sold      100,000    95 strike PDQ puts

Bought  100,000  105 strike PDQ calls

a. What is the delta of this position?

b. What position do you have to take in PDQ stock in order to be delta neutral?

c. What is the gamma of your position?

d. Instead of trading the stock, you want to make a delta neutral position using the 100 strike calls. How many should you trade? What will be the gamma of that delta neutral position?

e. You want to use the stock and the 100 strike call to make your position both gamma neutral and delta neutral. How many 100 strike calls should you trade? What is the stock position you will need to make the whole position delta neutral?

Show more

Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more