question archive Which of the following statements is (are) correct? (i) Option Delta can be hedged with an appropriate position in the underlying stock
Which of the following statements is (are) correct? (i) Option Delta can be hedged with an appropriate position in the underlying stock
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Which of the following statements is (are) correct? (i) Option Delta can be hedged with an appropriate position in the underlying stock. (ii) Option Delta can be hedged with an appropriate position in another option on the same stock. (iii) Option Gamma can be hedged with an appropriate position in the underlying stock. (iv) Option Gamma can be hedged with an appropriate position in another option on the same stock.
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i) Option Delta can be hedged with an appropriate position in the underlying stock.
iv) Option Gamma can be hedged with an appropriate position in another option on the same stock.
Explanation: Delta hedging is an options strategy that seeks to be directionally neutral by establishing offsetting long and short positions in the same underlying.
Gamma hedging consists of adding additional option contracts to an investors portfolio or stock , usually in contrast to the current position.
