Underlying trading at 100 and 20 annualized implied, Financial Management

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Underlying trading at 100 and 20 annualized implied

Underlying trading at $100, and $20 annualized implied volatility. You think IV is too low and decide to buy a 90-110 strangle with 3 months to expiration (DTE=63).

(Hint: a strangle is a combination of OTM PUT and OTM CALL.)

Assume interest rate of zero and normal distribution of prices.

Underlying moved to 95 immediately after your bought the strangle (DTE remains 30). What is the new delta for your strangle when underlying moved to $95? How should you hedge your delta with underlying?

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