Which of the following combinations of transactions will most effectively neutralize gamma and delta?
A. Buy 604 options to neutralize gamma; buy 27 futures to neutralize deltA.
B. Buy 604 options to neutralize gamma; sell 27 futures to neutralize delta.
C. Buy 931 options to neutralize gamma; buy 42 futures to neutralize delta.
D. Buy 931 options to neutralize gamma; sell 42 futures to neutralize delta.
Answer:A
Which of the following combinations of transactions will most effectively neutralize gamma and delta?
A. Buy 604 options to neutralize gamma; buy 27 futures to neutralize deltA. B. Buy 604 options to neutralize gamma; sell 27 futures to neutralize delta. C. Buy 931 options to neutralize gamma; buy 42 futures to neutralize delta. D. Buy 931 options to neutralize gamma; sell 42 futures to neutralize delta.
Explanation: To hedge market risk in the position, the producer must first neutralize gamma by purchasing an appropriate