Straddle gamma when the call gamma is 0.03

Question

Under Black–Scholes, a call with strike $K$ and expiry $T$ has gamma $0.03$ . What is the gamma of a straddle on the same stock with the same strike and expiry?

Short answer

$0.06$ . Put–call parity differs from a call only by stock and cash, which have zero gamma, so the put's gamma equals the call's. The straddle's gamma is $2\times0.03$ .

Adapted from QuantQuestions.io; question and answer rewritten by SelfMadeQuant.com.

See the hint and the full worked solution in the question bank (free account).

Open the worked solution

Lessons behind this question

Greeks and Numerical Sensitivities
Option Mechanics: Calls, Puts, Moneyness, Intrinsic Value, and Exchange vs. OTC Markets
Option Trading Strategies: Spreads, Combinations, and Payoff Engineering

Start with a free lesson: Options is part of a free topic. Create a free account, no card needed, to read it in full with worked solutions.

Read it free