FINA 4110 Slides 11 [Trading Strategies Involving Options]

FINA 4110 Slides 11 [Trading Strategies Involving Options]...

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Trading Strategies Involving Options Chapter 11 1
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Three Alternative Strategies z Take a position in the option and the underlying z Take a position in 2 or more options of the same type (A spread) z Combination: Take a position in a mixture of calls & puts (A combination) 2
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Positions in an Option & the Underlying (Figure 11.1, page 250) Profit K Profit S T K S T (a) Profit S T K (b) (d) Profit S T K (c) 3
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Bull Spread Using Calls (Figure 11.2, page 251) K 1 K 2 Profit S T 4
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Bull Spread Using Puts Figure 11.3, page 253 K 1 K 2 Profit S T 5
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Bear Spread Using Puts Figure 11.4, page 253 K 1 K 2 Profit S T 6
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Bear Spread Using Calls Figure 11.5, page 254 K 1 K 2 Profit S T 7
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Box Spread z A combination of a bull call spread and a bear put spread z If all options are European a box spread is
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This note was uploaded on 03/03/2012 for the course FINA 4110 taught by Professor Liu during the Spring '11 term at CUHK.

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FINA 4110 Slides 11 [Trading Strategies Involving Options]...

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