It’s B. In delta hedging, you either own the option or the underlying, but not both.
that’s not correct, delta hedging gets you to a delta of 0, long stock and long put will do the same thing. The question here from OP isn’t proper, with the numbers it all makes sense.
K so with delta hedging, you can go long the stock and short the call, or long the stock and long the put?
Yes, conceptually. Fundamentally all you need to do is add the deltas up to get to zero. long call and short put have + delta, short call and long put have - delta stock has +1 delta so in the example 200,000 shares Deltas: Call = .5977; Put = -.4023 Answers: A) Sell 334,616 put options B) Sell 334,616 call options C) Buy 300,703 put options 200,000 * 1 + 334,616 * -.5977 = 0
ro424 Wrote: ------------------------------------------------------- > that’s not correct, delta hedging gets you to a > delta of 0, long stock and long put will do the > same thing. > > The question here from OP isn’t proper, with the > numbers it all makes sense. If that’s how it works in the real world, then fine. But you’re in CFA land now.