A portfolio of derivatives on a stock has a delta of 2400 and a gamma of -100. An option on the stock with a delta of 0.6 and a gamma of 0.04 can be traded.
i) What position in the option creates a portfolio that is gamma neutral? Give the size of position, and state whether it is long or short. _ _ _ _ _ _
ii) After this position has been taken, what position in the stock is then necessary for delta neutrality? Give the size of position, and state whether it is long or short. _ _ _ _ _ _

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The Answer of A portfolio of derivatives on a stock has a delta of 2400 and a gamma of -100. An option on the stock with a delta of 0.6 and a gamma of 0.04 can be traded.
i) What position in the option creates a portfolio that is gamma neutral? Give the size of position, and state whether it is long or short. _ _ _ _ _ _
ii) After this position has been taken, what position in the stock is then necessary for delta neutrality? Give the size of position, and state whether it is long or short. _ _ _ _ _ _

A Portfolio of Derivatives on a Stock Has a Delta