asx_UnderstandingOptionStrategies

If it is below a then time decay works for you if it

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Unformatted text preview: it is below A, then time decay works for you. If it is above B, then it works gainst you. Profit A 0 B Loss Bullish 4 LONG SYNTHETIC SPLIT STRIKE 5 BULL SPREAD Construction: Buy 1 Call at A and Sell 1 Call at B, Buy 1 Put at A and Sell 1 Put at B. Margins: No for Calls and Yes for Puts. Your Market Outlook: Bullish. The share price will expire above B and not below A. The strategy provides protection if your view is wrong. Profit: The maximum profit is limited to the difference between A and B less the cost of the spread. If A and B are $1 apart and you bought the spread for $0.40, then maximum profit is $0.60. Loss: The maximum loss is also limited to the cost of the spread (Calls). Volatility: You are not affected by volatility. Time Decay: It depends on the underlying share price, if it is below A, then time decay works against you. If it is above B, then it works for you. Profit B 0 A Loss Construction: Sell 1 Call at A and Buy 2 Calls at B. Margins: Yes. Your Market Outlook: Bullish. The share price w...
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