I sometimes find it difficult to see, how to hedge a portfolio.
Let say, that I created a product consisting of an Asian call (strike 1), Vanilla call (strike 2), and an Asian Put (strike 1) on a stock called ABC. Now let say the the delta of the total product is 60%, Gamma is 1,5% and Vega is 1,5.
Now If I SHORT this "product", then I can delta-hedge the portfolio by going LONG in the underlying (Stock ABC) by 0,70 for one product I sell. I think this is correct?
But what about the gamma and the vega?
So I can gamma-hedge as well, but here I cannot just by/sell the underlying. I need an option on the underlying? ANd this option need to have a gamma of 1,5, but do I need to buy or sell the option??
And waht about Vega?
I hope you guys can help me! Thanks,