Trading Strategies Involving Options Chapter 10 Options Futures

  • Slides: 15
Download presentation
Trading Strategies Involving Options Chapter 10 Options, Futures, and Other Derivatives, 7 th Edition,

Trading Strategies Involving Options Chapter 10 Options, Futures, and Other Derivatives, 7 th Edition, Copyright © John C. Hull 2008 1

Types of Strategies Take a position in the option and the underlying Take a

Types of 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) Options, Futures, and Other Derivatives 7 th Edition, Copyright © John C. Hull 2008 2

Positions in an Option & the Underlying (Figure 10. 1, page 220) Profit K

Positions in an Option & the Underlying (Figure 10. 1, page 220) Profit K K ST ST (a) Profit (b) K ST (c) K ST (d) Options, Futures, and Other Derivatives 7 th Edition, Copyright © John C. Hull 2008 3

Bull Spread Using Calls (Figure 10. 2, page 221) Profit ST K 1 K

Bull Spread Using Calls (Figure 10. 2, page 221) Profit ST K 1 K 2 Options, Futures, and Other Derivatives 7 th Edition, Copyright © John C. Hull 2008 4

Bull Spread Using Puts Figure 10. 3, page 222 Profit K 1 K 2

Bull Spread Using Puts Figure 10. 3, page 222 Profit K 1 K 2 ST Options, Futures, and Other Derivatives 7 th Edition, Copyright © John C. Hull 2008 5

Bear Spread Using Puts Figure 10. 4, page 223 Profit K 1 K 2

Bear Spread Using Puts Figure 10. 4, page 223 Profit K 1 K 2 ST Options, Futures, and Other Derivatives 7 th Edition, Copyright © John C. Hull 2008 6

Bear Spread Using Calls Figure 10. 5, page 225 Profit K 1 K 2

Bear Spread Using Calls Figure 10. 5, page 225 Profit K 1 K 2 ST Options, Futures, and Other Derivatives 7 th Edition, Copyright © John C. Hull 2008 7

Box Spread A combination of a bull call spread and a bear put spread

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. (See Business Snapshot 10. 1) Options, Futures, and Other Derivatives 7 th Edition, Copyright © John C. Hull 2008 8

Butterfly Spread Using Calls Figure 10. 6, page 227 Profit K 1 K 2

Butterfly Spread Using Calls Figure 10. 6, page 227 Profit K 1 K 2 K 3 ST Options, Futures, and Other Derivatives 7 th Edition, Copyright © John C. Hull 2008 9

Butterfly Spread Using Puts Figure 10. 7, page 228 Profit K 1 K 2

Butterfly Spread Using Puts Figure 10. 7, page 228 Profit K 1 K 2 K 3 ST Options, Futures, and Other Derivatives 7 th Edition, Copyright © John C. Hull 2008 10

Calendar Spread Using Calls Figure 10. 8, page 228 Profit ST K Options, Futures,

Calendar Spread Using Calls Figure 10. 8, page 228 Profit ST K Options, Futures, and Other Derivatives 7 th Edition, Copyright © John C. Hull 2008 11

Calendar Spread Using Puts Figure 10. 9, page 229 Profit ST K Options, Futures,

Calendar Spread Using Puts Figure 10. 9, page 229 Profit ST K Options, Futures, and Other Derivatives 7 th Edition, Copyright © John C. Hull 2008 12

A Straddle Combination Figure 10. 10, page 230 Profit K ST Options, Futures, and

A Straddle Combination Figure 10. 10, page 230 Profit K ST Options, Futures, and Other Derivatives 7 th Edition, Copyright © John C. Hull 2008 13

Strip & Strap Figure 10. 11, page 231 Profit K Strip ST K ST

Strip & Strap Figure 10. 11, page 231 Profit K Strip ST K ST Strap Options, Futures, and Other Derivatives 7 th Edition, Copyright © John C. Hull 2008 14

A Strangle Combination Figure 10. 12, page 232 Profit K 1 K 2 ST

A Strangle Combination Figure 10. 12, page 232 Profit K 1 K 2 ST Options, Futures, and Other Derivatives 7 th Edition, Copyright © John C. Hull 2008 15