The stock price is 90 the yearly standard deviation is 40


You are short 50 calls at a strike of 95. The stock price is 90, the yearly standard deviation is 40 percent, the yearly . interest rate is 4%, and the time to expiration is 3 months. You can buy/sell the underlying stock or a put option at 85 that expires in three months. You will be happy to know that the “d” in the Black-Sholes formula above is -0.12 for call at 95, and 0.436 for the put at 85. Given all this, what portfolio should you buy to delta-gamma hedge your portfolio?

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Financial Management: The stock price is 90 the yearly standard deviation is 40
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