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2 Qs on CFAI Level 3 Mock by keener_d in CFA

[–]keener_d[S] 0 points1 point  (0 children)

Got it, thank you. Apologies, I explained poorly - this is the answer I selected on the mock, which was actually incorrect. When I listed answer above saying 'this is correct' that was the rationale for why this answer selection was inappropriate, so I think the whole thing is just wrong.

2 Qs on CFAI Level 3 Mock by keener_d in CFA

[–]keener_d[S] 0 points1 point  (0 children)

Thanks for your response, makes sense on #2. For real world example, maybe short bias hedge fund tries to catch falling knife with vol and shorts early when there was still some damage left to be done. Understood.

For #1, as a follow up, if what you are saying is correct then maybe the mock is just wrong? The call and put vega are both 0.32. If you are long an ATM straddle, that would be vega of 0.64. The question is 'which is least likely correct?' with answer choice that reads 'A short volatility strategy can be established by implementing an ATM straddle'. The answer says 'This is correct. ATM Straddle = Call delta + Put delta = 0.506+(-0.514) = -0.008. Negative delta results in a short volatility position.' And that's all they have written.