Bear Spread Using Puts

Bear Spread Using Puts - - c1-c2 K1 – K2- c1-c2 Box...

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Bear Spread Using Puts Figure 11.4, page 253 K1 K2 Profit ST 1
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Bear Spread Using Calls Figure 11.5, page 254 K1 K2 Profit ST 2
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Bear Spread Using Calls Note K1 < K2 so c1> c2 and written spread 3 Today ST < K1 K1<ST <K2 ST > K2 Buy call 2 -c2 - - ST - K2 Sell call 1 +c1 - K1 - ST K1 - ST payoff c1-c2 0 K1 – ST K1 – K2 Total c1-c2 K1 – ST
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Unformatted text preview: - c1-c2 K1 – K2- c1-c2 Box Spread • A combination of a bull call spread and a bear put spread • 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 4...
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This note was uploaded on 01/19/2012 for the course FIN 4520 taught by Professor Lucyackert during the Spring '12 term at Kennesaw.

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Bear Spread Using Puts - - c1-c2 K1 – K2- c1-c2 Box...

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