PPT - Option Strategies & Exotics PowerPoint Presentation..

Option Strategies & Exotics - PowerPoint PPT Presentation. Trading Strategies Involving Options -. chapter 10. three alternative strategies.Read this presentation I prepared with couple of my classmates for a case study i. Options Trading Strategies ulliSingle Option & a Stock. S T - X Payoff + Cost C 0 K - S T S T K Payoff + Cost C 0 0 S T = K Profit Price of Call Payoff Stock Price Range; 10. Chapter 2Insurance Contract.Start studying Chapter 11 Trading Strategies involving options. Learn vocabulary, terms, and more with flashcards, games, and other study tools.Trading strategies involving options. Chapter 10. By not including the Technical Notes in the book, I am able to streamline the presentation. Investition xls file. CHAPTER 12 Trading Strategies Involving Options Practice Questions Problem 12.1. What position in call options is equivalent to a protective put?A protective put consists of a long position in a put option combined with a long position in the underlying shares.It is equivalent to a long position in a call option plus a certain amount of cash.This follows from put–call parity: p  S0 c  Ke  r T  D Problem 12.2.

Chapter 11 Trading Strategies involving options.

Explain two ways in which a bear spread can be created.A bear spread can be created using two call options with the same maturity and different strike prices.The investor shorts the call option with the lower strike price and buys the call option with the higher strike price. 01 the one - kerala trance binary led watch. A bear spread can also be created using two put options with the same maturity and different strike prices.In this case, the investor shorts the put option with the lower strike price and buys the put option with the higher strike price. When is it appropriate for an investor to purchase a butterfly spread?A butterfly spread involves a position in options with three different strike prices ( K1  K 2  and K 3 ).

Trading Strategies Involving Options Chapter 10 Three Alternative Strategies Take a position in the option and the underlying Take a position in 2 or more options of the same type A spread Combination Take a position in a mixture of calls & puts A combination Positions in an Option & the Underlying Figure 10.1, page 226 Profit ST K.Hull Chapter 10 Options, Futures, and Other Derivatives, 7th 1. Trading Strategies Involving Options Author John C. Hull Subject Options, Futures, and Other.Options, Futures, and Other Derivatives with Derivagem CD 7th Edition. both a best-selling college textbook and the "bible" in trading rooms throughout the world. CHAPTER 4—"Hedging Strategies Using Futures," a new chapter on the use of. For instance, included is a very elegant presentation of the Black-Scholes. Later chapters will examine such topics as trading strategies involving options, the determination of option prices, and the ways in which portfolios of options can be hedged. This chapter is concerned primarily with stock options. It also presents some introductory material on currency options, index options, and futures options. More details.Options, Futures, and Other Derivatives, 10th Edition.Options. • Real options. Main issues. • Forwards and Futures. • Forward and Futures Prices. Chapter 10. Forwards and Futures. 10-1. 1 Forward Contracts. Definition A forward contract is a commitment. futures, trading in the futures market is easier than trading. This strategy allows one to lock in a purchase of the 7% T-.

Options, Futures, and Other Derivatives, 8th Edition

In a strangle they have different strike prices and the same expiration date. Define p1 and c1 as the prices of put and call with strike price K1 and p2 and c2 as the prices of a put and call with strike price K 2 .From put-call parity p1  S c1  K1e  r T p2  S c2  K 2 e  r T identical to the cost of a butterfly spread created from European calls.Define c1 , c2 , and c3 as the prices of calls with strike prices K1 , K 2 and K 3 . Major exchanges trading futures and options. 767. Tables for Nx. 768. Chapter 10 Trading strategies involving options. 223.Get one projectoption course for FREE when you open and fund your first tastyworks brokerage account with more than 00.Suppose the 3-year interest rate is 6% with continuous compounding. The price today of a risk-free Define p1 , p2 and p3 as the prices of puts with strike prices K1 , K 2 and K 3 . A put with the same strike price and expiration date costs $4.With the usual notation c1  K1e r T  p1  S c2  K 2 e  r T  p2  S c3  K3e  r T  p3  S Hence c1  c3  2c2  ( K1  K 3  2 K 2 )e  r T  p1  p3  2 p2 Because K 2  K1 K 3  K 2 , it follows that K1  K 3  2 K 2 0 and c1  c3  2c2  p1  p3  2 p2 The cost of a butterfly spread created using European calls is therefore exactly the same as the cost of a butterfly spread created using European puts. Construct a table that shows the profit from a straddle.For what range of stock prices would the straddle lead to a loss?||Major exchanges trading futures and options. 767. Tables for Nx. 768. Chapter 10 Trading strategies involving options. 223.Get one projectoption course for FREE when you open and fund your first tastyworks brokerage account with more than $2000.Suppose the 3-year interest rate is 6% with continuous compounding. The price today of a risk-free $1,000 par value bond is $835.27 and the dollar interest earned will be 1,000 – 835.27 = $164.73 The bank finds a 3-year call option on a stock or portfolio costing less than $164.73 and offers it to the client along with the risk-free bond. The client invests $1,000 where $835.27 go toward.,000 par value bond is 5.27 and the dollar interest earned will be 1,000 – 835.27 = 4.73 The bank finds a 3-year call option on a stock or portfolio costing less than 4.73 and offers it to the client along with the risk-free bond. The client invests Define p1 , p2 and p3 as the prices of puts with strike prices K1 , K 2 and K 3 . A put with the same strike price and expiration date costs $4.With the usual notation c1  K1e r T  p1  S c2  K 2 e  r T  p2  S c3  K3e  r T  p3  S Hence c1  c3  2c2  ( K1  K 3  2 K 2 )e  r T  p1  p3  2 p2 Because K 2  K1 K 3  K 2 , it follows that K1  K 3  2 K 2 0 and c1  c3  2c2  p1  p3  2 p2 The cost of a butterfly spread created using European calls is therefore exactly the same as the cost of a butterfly spread created using European puts. Construct a table that shows the profit from a straddle.For what range of stock prices would the straddle lead to a loss?||Major exchanges trading futures and options. 767. Tables for Nx. 768. Chapter 10 Trading strategies involving options. 223.Get one projectoption course for FREE when you open and fund your first tastyworks brokerage account with more than $2000.Suppose the 3-year interest rate is 6% with continuous compounding. The price today of a risk-free $1,000 par value bond is $835.27 and the dollar interest earned will be 1,000 – 835.27 = $164.73 The bank finds a 3-year call option on a stock or portfolio costing less than $164.73 and offers it to the client along with the risk-free bond. The client invests $1,000 where $835.27 go toward.,000 where 5.27 go toward.

Three Alternative Strategies Take a position in the option and the underlying asset Take a position in 2. 10.1 Trading Strategies Involving Options Chapter 10.Fundamentals of Futures and Options Markets, Australasian Edition. Packed with numerical examples and accounts of real-life situations, this.Chapter 12 trading strategies involving options practice questions problem 12.1. what is meant by protective put? what position in call options is equivalent to. [[An investor believes that there will be a big jump in a stock price, but is uncertain as to the direction.Identify six different strategies the investor can follow and explain the differences among them.Possible strategies are: Strangle Straddle Strip Strap Reverse calendar spread Reverse butterfly spread The strategies all provide positive profits when there are large stock price moves.

John Hull - Options- Futures - Livro texto da disciplina.

A strangle is less expensive than a straddle, but requires a bigger move in the stock price in order to provide a positive profit.Strips and straps are more expensive than straddles but provide bigger profits in certain circumstances.A strip will provide a bigger profit when there is a large downward stock price move. Metatrader iq options broker paypal. A strap will provide a bigger profit when there is a large upward stock price move.In the case of strangles, straddles, strips and straps, the profit increases as the size of the stock price movement increases.By contrast in a reverse calendar spread and a reverse butterfly spread there is a maximum potential profit regardless of the size of the stock price movement. How can a forward contract on a stock with a particular delivery price and delivery date be created from options?

Suppose that the delivery price is K and the delivery date is T .The forward contract is created by buying a European call and selling a European put when both options have strike price K and exercise date T .This portfolio provides a payoff of ST  K under all circumstances where ST is the stock price at time T . If K F0 , the forward contract that is created has zero value. Two can be combined to create a long forward position and two can be combined to create a short forward position.” Explain this statement. Forex handelszeiten weltweit. This shows that the price of a call equals the price of a put when the strike price is F0 . A box spread is a bull spread created using calls and a bear spread created using puts.With the notation in the text it consists of a) a long call with strike K1 , b) a short call with strike K 2 , c) a long put with strike K 2 , and d) a short put with strike K1 .A) and d) give a long forward contract with delivery price K1 ; b) and c) give a short forward contract with delivery price K 2 .

Chapter 10 trading strategies involving options ppt

The two forward contracts taken together give the payoff of K 2  K1 . What is the result if the strike price of the put is higher than the strike price of the call in a strangle? How long does a principal-protected note, created as in Example 12.1, have to last for it to be profitable to the bank? Assume that the investment in the index is initially $100.(This is a scaling factor that makes no difference to the result.) Deriva Gem can be used to value an option on the index with the index level equal to 100, the volatility equal to 20%, the risk-free rate equal to 4%, the dividend yield equal to 1%, and the exercise price equal to 100.For different times to maturity, T, we value a call option (using Black-Scholes European) and the amount available to buy the call option, which is 100-100e-0.04×T. Interactive broker paper trading. Results are as follows: Time to maturity, T 1 2 5 10 11 Funds Available 3.92 7.69 18.13 32.97 35.60 Value of Option 9.32 13.79 23.14 33.34 34.91 This table shows that the answer is between 10 and 11 years.Continuing the calculations we find that if the life of the principal-protected note is 10.35 year or more, it is profitable for the bank. A trader sells a strangle by selling a call option with a strike price of $50 for $3 and selling a put option with a strike price of $40 for $4.(Excel’s Solver can be used in conjunction with the Deriva Gem functions to facilitate calculations.) Further Questions Problem 12.20. For what range of prices of the underlying asset does the trader make a profit?

Chapter 10 trading strategies involving options ppt

A trader creates a bear spread by selling a six-month put option with a $25 strike price for $2.15 and buying a six-month put option with a $29 strike price for $4.75. What is the total payoff when the stock price in six months is (a) $23, (b) $28, and (c) $33. The trader makes a profit if the total payoff is less than $7.This happens when the price of the asset is between $33 and $57. Three put options on a stock have the same expiration date and strike prices of $55, $60, and $65.The market prices are $3, $5, and $8, respectively. Construct a table showing the profit from the strategy. Alicia keys sleeping broken heart dailymotion. For what range of stock prices would the butterfly spread lead to a loss?A butterfly spread is created by buying the $55 put, buying the $65 put and selling two of the $60 puts. The following table shows the profit/loss from the strategy.Stock Price ST 65 Payoff 0 Profit 1 60 ST  65 65  ST 64  ST 55 ST  60 ST  55 0 ST  56 1 ST  55 The butterfly spread leads to a loss when the final stock price is greater than $64 or less than $56. A diagonal spread is created by buying a call with strike price K 2 and exercise date T2 and selling a call with strike price K1 and exercise date T1 (T2  T1 ) .