Two call options have the same delta but option A has a higher gamma than option B. When the price of the underlying asset increases, the number of option A calls necessary to hedge the price risk in 100 shares of stock, compared to the number of option B calls, is a: A) larger (negative) number. B) larger positive number. C) smaller positive number. D) smaller (negative) number.

C ?

what is -ve gamma?

I had one of our marketing guys call me from a bathroom stall and ask that same question (really). Negative gamma means you are short options so if markets start moving against your position each tick against you is worse than the one before.

D? If gamma increases at a faster rate, delta would more quickly approach 1, thus decreasing the amount of options you need to hedge?

d for me too

LanceTX Wrote: ------------------------------------------------------- > D? If gamma increases at a faster rate, delta > would more quickly approach 1, thus decreasing the > amount of options you need to hedge? Yep.

F@ck, I would’ve said C)

Its call options, so you have to sell (negative) to hedge your long position.

so whats the answer?

I believe it was D) If Joie de Vivre says it is D…it IS D!

The answer is D