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Ask Agatha André Farber. Executive summary June 25, 2004: Petrov takes Natacha out for dinner + offers earrings. After this celebration, Petrov becomes.

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Presentation on theme: "Ask Agatha André Farber. Executive summary June 25, 2004: Petrov takes Natacha out for dinner + offers earrings. After this celebration, Petrov becomes."— Presentation transcript:

1 Ask Agatha André Farber

2 Executive summary June 25, 2004: Petrov takes Natacha out for dinner + offers earrings. After this celebration, Petrov becomes unusually nervous. Natacha discovers that Petrov went short on a straddle. She writes Agatha for advice.

3 1) What does it mean being short on a straddle? Does it have anything to do with horses? Why did Petrov go short on a straddle? Nothing to do with horses. Petrov sold two options on the Chicago Board of Exchange: – 1 call on S&P 500, Maturity December, Strike 1,140 – 1 put on S&P 500, Maturity December Strike, 1,140

4 2) What evolution of the S&P 500 did Petrov expected on the day of our wedding anniversary?

5 3 ) How much money did he earn by going short on this straddle?

6 4 ) Does the recent history of the S&P 500 index explain why Petro became so nervous? Did we loose any money?

7

8 5) What should I tell Petrov? I love you.


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