Explanation:
If the investor has written 15,000 call options, he must go long delta times the short option position to create a delta-neutral position, or buy $15,000 × 0.50 = 7,500 shares. Note that the delta of a call option, which is exactly at-the-money, is 0.5.
(Book 4, Module 62.2, LO 62.d)
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Question 33
To create a delta-neutral portfolio, an investor who has written 15,000 call options (that are currently exactly at-the-money) will have to:
A
long 7,500 shares in the underlying instrument.
B
short 7,500 shares in the underlying instrument.
C
long 15,000 shares in the underlying instrument.
D
short 15,000 shares in the underlying instrument.
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