Explanation

To understand why option A is correct, let's analyze the greek exposures:

Current Portfolio:

• Delta neutral (Δ = 0)
• Positive gamma (Γ > 0)

Option A: Buy call options and sell stock A

• Call options have positive delta and positive gamma
• Stock has delta of +1 and gamma of 0
• Buying calls: Increases positive gamma
• Selling stock: Creates negative delta
• The negative delta from selling stock can offset the positive delta from buying calls
• The positive gamma from buying calls can offset the existing positive gamma

Why other options don't work:

• Option B: Selling calls (negative gamma) would make gamma more positive, not neutral
• Option C: Buying puts (negative delta, positive gamma) and buying stock (positive delta) would maintain positive gamma
• Option D: Selling puts (positive delta, negative gamma) and selling stock (negative delta) would make gamma more negative

The key insight is that we need to reduce positive gamma while maintaining delta neutrality. Buying options (which have positive gamma) and adjusting the stock position to maintain delta neutrality achieves this goal.