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training_data/curated/text/ecc1140c5f21c768b6fb977257eb0e876e51e926ae758b288dee8c0d472a74d2.txt

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+894 Part VI: Measuring and Trading Volatility 
+quick changes in volatility. In order to quantify the statement that he "wants to be 
+gamma long," let us assume that he wants to be gamma long 1,000 shares or 10 con­
+tracts. 
+It is known that delta can always be neutralized last, so let us concentrate on the 
+other two variables first. The two equations below are used to determine the quanti­
+ties to buy in order to make gamma long and vega neutral: 
+0.0510x + 0.0306y = 10 (gamma, expressed in# of contracts) 
+0.089x + 0.147y = 0 (vega) 
+The solution to these equations is: 
+X = 308, y = -186 
+Thus, one would buy 308 March 60 calls and would sell 186 June 60 calls. This is the 
+reverse calendar spread that was discussed: Near-term calls are bought and longer­
+term calls are sold. 
+Finally, the delta must be neutralized. To do this, calculate the position delta 
+using the quantities just determined: 
+Position delta= 0.54 x 308 - 0.57 x 186 = 60.30 
+So, the position is long 60 contracts, or 6,000 shares. It can be made delta neutral by 
+selling short 6,000 shares of XYZ. 
+The overall position would look like this: 
+Position 
+Short 6,000 XYZ 
+Long 308 March 60 calls 
+Short 186 June 60 calls 
+Its risk measurements are: 
+Delta 
+1.00 
+0.54 
+0.57 
+Position delta: long 30 shares (neutral) 
+Position vega: $7 (neutral) 
+Position gamma: long 1,001 shares 
+Gamma 
+0 
+0.0510 
+0.0306 
+Vega 
+0 
+0.089 
+0.147 
+This position then satisfies the initial objectives of wanting to be gamma long 
+1,000 shares, but delta and vega neutral. 
+Finally, note that theta = -$625. The position will lose $625 per day from time 
+decay. 
+The strategist must go further than this analysis, especially if one is dealing with 
+positions that are not simple constructions. He should calculate a profit picture as