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training_data/curated/text/9d7df90ef2330588feeb16fcfa6ec0ab55e82eb8ee8fe08f340ed5657c653365.txt

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+882 Part VI: Measuring and Trading Volatmty 
+Merely divide the two gammas to determine the neutral ratio to be used. In this case, 
+assume that the April 50 call and the April 60 call are to be used: 
+Gamma neutral ratio: 0.045/0.026 = 1.73-to-l 
+Thus, a gamma neutral position would be created by buying 100 April 50's and sell­
+ing 173 April 60's. Alternatively, buying 10 and selling 17 would be close to gamma 
+neutral as well. The larger position will be used for the remainder of this example. 
+Now that this ratio has been chosen, what is the effect on delta and vega? 
+Option Position Option Position Option Position 
+Position Delta Delta Gamma Gamma Vega Vega 
+Long 1 00 April 50 0.47 +4,700 0.045 +450 0.08 + $800 
+Short 173 April 60 0.17 -2,941 0.026 -450 0.06 -1,038 
+Total: + 1,759 0 - $238 
+The position delta is long 1,759 shares of XYZ. This can easily be "cured" by 
+shorting 1,700 or 1,800 shares ofXYZ to neutralize the delta. Consequently, the com­
+plete position, including the short 1,700 shares, would be neutral with respect to both 
+delta and gamma, and would have the desired negative vega. 
+The actual profit picture at expiration is shown in Figure 40-11. Bear in mind, 
+however, that the strategist would normally not intend to hold a position like this until 
+expiration. He would close it out if his expectations on volatility decline were fulfilled 
+( or proved false). 
+FIGURE 40-11. 
+Spread with negative vega; gamma and delta neutral. 
+40000...., .... 
+10000 
+50 55 60 
+XVZ :Stock Price