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Theta pays for gamma · Part 2 of 3
An at-the-money option on a stock at $200 has implied volatility of 25% and gamma of 0.012. Rates are zero and you hold the option delta-hedged.
Over the next month (one-twelfth of a year) the stock realises 30% volatility. Treating gamma as constant, what does the hedged option expect to make?
Answer with a number. Fractions, powers and expressions like 23/6 or C(52,5) are read correctly in practice.
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