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# P1.T4.414. Option Greeks

#### Nicole Seaman

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Concept: These on-line quiz questions are not specifically linked to AIMs, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical AIM-by-AIM question such that the intended difficulty level is nearer to an actual exam question. As these represent "easier than our usual" practice questions, they are well-suited to online simulation.

Questions:

414.1. Trader Jane writes 100 call options with a five year maturity and strike price of \$35.00 on a stock that pays a 6.0% dividend (T = 5.0, q = 5.0%). Each call option has a percentage delta of exactly 0.500. If she wants to use put options with the same strike price and maturity, which trade will approximately neutralize the net position delta?

a. Buy 83 put options (K = 35, T = 5)
b. Sell 83 put options (K = 35, T = 5)
c. Sell 145 put options (K = 35, T = 5)
d. Sell 208 put options (K = 35, T = 5)

414.2. Trader Bob holds a delta-neutral portfolio but his position gamma is +600. Using call options with percentage delta of 0.50 and percentage gamma of 0.30, which trades neutralize both delta and gamma simultaneously?

a. Buy 600 options and sell 300 underlying shares
b. Buy 1,200 options and buy 600 underlying shares
c. Write 1,000 options and sell 600 underlying shares
d. Write 2,000 options and buy 1,000 underlying shares

414.3. A long position in European call options is approaching its expiration such that its maturity is near zero. The options happen to be nearly at-the-money; i.e., the current asset price is nearly equal to the strike price. Which of the following is most likely true?

a. Vega is increasing as expiration approaches
b. Delta is tending toward 1.0 as expiration approaches
c. Gamma is positive and large, while theta is negative and large
d. Both gamma and theta are tending toward zero as expiration approaches

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