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:
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.
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
2) What evolution of the S&P 500 did Petrov expected on the day of our wedding anniversary?
3 ) How much money did he earn by going short on this straddle?
4 ) Does the recent history of the S&P 500 index explain why Petro became so nervous? Did we loose any money?