Rehedging a book after a move
You are long 100 identical calls and start perfectly delta-hedged. Each call currently has delta and gamma (per $1 move, per share). The stock then jumps up $3. To restore delta-neutrality, how many shares must you now trade — and in which direction? Give the number of shares (a positive number; state the direction in your reasoning).
Show hints (2)+
- Gamma updates delta: .
- Trade the difference between the new hedge and the one you already hold, not the whole new hedge.
Answer
Reveal answer →Final answer
24
Want the full step-by-step worked solution? It's part of Premium — along with a worked solution for every question in the bank.