Presentation is loading. Please wait.

Presentation is loading. Please wait.

11.1 Trading Strategies Involving Options Chapter 11.

Similar presentations


Presentation on theme: "11.1 Trading Strategies Involving Options Chapter 11."— Presentation transcript:

1 11.1 Trading Strategies Involving Options Chapter 11

2 11.2 Three Alternative Strategies Take a position in the option and the underlying asset Take a position in 2 or more options of the same type, i.e. all calls or all puts (spread) Combination: Take a position in a mixture of calls & puts (combination)

3 11.3 Positions in an option & the underlying stock (put-call parity) Profit STST K STST K STST K STST K ( a ) Short put (b) Long put (c) Long call (d) Short call

4 11.4 Bull Spread Using Calls (buy low K, sell high K) K1K1 K2K2 Profit STST

5 11.5 Bull Spread Using Puts (buy low K, sell high K) K1K1 K2K2 Profit STST

6 11.6 Bear Spread Using Puts (buy high K, sell low K) K1K1 K2K2 Profit STST

7 11.7 Bear Spread Using Calls (buy high, sell low K) K1K1 K2K2 Profit STST

8 11.8 Box Spread A combination of a bull call spread and a bear put spread Payoff diagram looks like a box If all options are European a box spread is worth the present value of the difference between the strike prices If they are American this is not necessarily so

9 11.9 Butterfly Spread Using Calls (buy lowest and highest K, sell 2 intermediate K) K1K1 K3K3 Profit STST K2K2

10 11.10 Butterfly Spread Using Puts (buy highest and lowest K, sell 2 intermediate K) K1K1 K3K3 Profit STST K2K2

11 11.11 Calendar Spread Using Calls (short short, long long; at short maturity date) Result looks like a butterfly spread Profit STST K

12 11.12 Calendar Spread Using Puts (short short, long long; at short maturity date) Result looks like a butterfly spread Profit STST K

13 11.13 A Straddle Combination: long call and put (same K, same expiry) Profit STST K

14 11.14 Strip (2 puts, 1 call) & Strap (2 calls, 1 put) Profit KSTST KSTST StripStrap

15 11.15 A Strangle: similar to straddle but call K > put K K1K1 K2K2 Profit STST

16 11.16 Strangle not!: what if call K < put K? K1K1 K2K2 Profit STST


Download ppt "11.1 Trading Strategies Involving Options Chapter 11."

Similar presentations


Ads by Google