Gamma of positions
Quantitative Finance
Level
3
The stock is currently trading at 30. Which option strategy has more Gamma?
Long the 29-31 strangle
Long the 28-32 strangle
Long straddle on the 31 strike
Long straddle on the 30 strike
Long straddle on the 29 strike
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1 solution
The Gammas of a call and put of the same underlying stock, strike and expiry are the same. Gamma is largest when the option is ATM and gradually decrease as it moves towards OTM and ITM. Therefore, when the stock is trading at 30, the long straddle on the 30 strike when options are ATM has more Gamma.