Trading Strategies Involving Options

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

Options, Futures, and Other Derivatives, 7th

1

 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 7th Edition, Copyright © John C. Hull 2008

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Profit

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(b) Profit

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K ST (c) Options, Futures, and Other Derivatives 7th Edition, Copyright © John C. Hull 2008

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(d) 3

Profit ST

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

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Strip Options, Futures, and Other Derivatives 7th Edition, Copyright © John C. Hull 2008

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

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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 7th Edition, Copyright © John C. Hull 2008

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