Answer: Sell the 1-month option and buy the 4-month option.

## Explanation To understand why option C is correct, let's analyze the Greeks: ### Gamma (Γ) - Gamma measures the rate of change of delta with respect to changes in the underlying asset price - Gamma is highest for at-the-money options with short time to expiration - The 1-month option has higher gamma than the 4-month option - **To reduce gamma**: We need to sell options with high gamma (1-month option) ### Vega (ν) - Vega measures sensitivity to changes in implied volatility - Vega is higher for options with longer time to expiration - The 4-month option has higher vega than the 1-month option - **To increase vega**: We need to buy options with high vega (4-month option) ### Analysis of Option C: "Sell the 1-month option and buy the 4-month option" - **Selling 1-month option**: Reduces gamma (since short-term options have high gamma) - **Buying 4-month option**: Increases vega (since long-term options have high vega) This combination achieves both objectives: - Gamma decreases (from selling high-gamma 1-month option) - Vega increases (from buying high-vega 4-month option) The other options don't achieve both objectives simultaneously: - **A**: Buying both would increase both gamma and vega - **B**: Would increase gamma (from buying 1-month) and decrease vega (from selling 4-month) - **D**: Selling both would decrease both gamma and vega

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