asx_UnderstandingOptionStrategies

Margins no your market outlook volatileevent driven

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Unformatted text preview: ught options will increase in value. You are unsure of the direction of the stock but you think it will make a large move. Profit: The maximum profit for this trade is unlimited on the upside and limited on the downside to the strike price, as the share can't fall below zero. Loss: The maximum loss for this trade is the premium paid to buy both options. Volatility: The option value will increase as volatility increases which is good for both options. Alternatively a decrease in volatility will be bad for both options. Time Decay: As each day passes the value of the option erodes (bad). Profit 0 Loss A 20 LONG STRANGLE Construction: Buy 1 Call at B and Buy 1 Put at A. Margins: No. Your Market Outlook: Volatile/Event Driven. Volatility will increase, if it does both bought options will increase in value. You are unsure of the direction of the stock but you think it will make a large move. Profit: The maximum profit for this trade is unlimited on the upside and limited on the downside to the stri...
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