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Call lungo breve chiamata a lunga Mettere breve Mettere lungo call spread a breve put Stendere breve call spread put lunghi diffuse lungo Combo breve Combo lungo Volatilità commerciali a breve Volatilità Commercio lungo Straddle breve Straddle lungo strangolare brevi strangolare lunghi Guts Guts brevi lungo Buttery corta Buttery lungo Condor breve Condor ferro lungo Buttery ferro corto Buttery lungo calendario Stendere lunga diagonale Calendario sviluppa lungo Straddle Calendario Stendere lunga diagonale Straddle Calendario Diffusione ConversionReversal lunga scatola lungo due da un rapporto di call spread 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 LIFFE strategie di opzione 32. breve due da un Rapporto di Diffusione 33. lungo due da una messa Rapporto Stendere 34. breve due da una messa Rapporto Stendere 35 chiamate. lunga scala di chiamata 36. breve chiamata Scala 37. lungo put Scala 38. breve put Scala 39. sintetico lungo futuro 40. sintetico breve futuro 41. lungo call spread rispetto put 42. breve call spread rispetto put 43. lungo put Stendere contro chiamata 44 . put breve Stendere contro chiamata 45. lungo forca contro chiamata 46. breve forca contro chiamata 47. lungo forca contro Mettere 48. breve forca contro put 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 LIFFE strategie di opzione I nt ro duzione eventi negli ultimi anni hanno messo in evidenza la volatilità e l'incertezza che è una caratteristica intrinseca dei mercati finanziari di oggi. LIFFEs vasta gamma di strategie di opzione prevede non solo per una vasta gamma di punti di vista e consente agli utenti di far leva, ma offre i vantaggi di esecuzione all'interno di una singola transazione, consentendo spread competitivi e exchange. Futures ridotti 038 Opzioni Strategy Guide Utilizzo delle future e opzioni, sia separatamente o in combinazione, in grado di offrire innumerevoli opportunità di trading. Le 25 strategie in questa guida non sono destinati a fornire una guida completa per ogni possibile strategia commerciale, ma piuttosto un punto di partenza. Se il contenuto si rivelerà le migliori strategie e le misure di follow-up per voi dipenderà sulla vostra conoscenza del mercato, la sua capacità di rischio di trasportare e gli obiettivi di commercio di materie prime. Come utilizzare questa guida - Questa pubblicazione è stata progettata, non come una guida completa per ogni possibile scenario, ma piuttosto come un manuale di facile utilizzo che suggerisce possibili strategie di trading. Futures lunghe - Quando si è rialzista sul mercato e incerto circa la volatilità. Non sarà influenzato dalla volatilità che cambia. Tuttavia, se si dispone di un parere sulla volatilità e che opinione si rivela corretta, una delle altre strategie possono avere un maggiore potenziale di profitto eo meno rischi. Lunghe Futures sintetici - Quando si è rialzista sul mercato e incerto circa la volatilità. Non sarà influenzato dalla volatilità che cambia. Tuttavia, se si dispone di un parere sulla volatilità e che opinione si rivela corretta, una delle altre strategie possono avere un maggiore potenziale di profitto eo meno rischi. Possono essere negoziati in da chiamata a lunga iniziale o la posizione put corta di creare una posizione rialzista più forte. Brevi Futures sintetici - Quando si è ribassista sul mercato e incerto circa la volatilità. Non sarà influenzato dalla volatilità che cambia. Tuttavia, se si dispone di un parere sulla volatilità e che opinione si rivela corretta, una delle altre strategie possono avere un maggiore potenziale di profitto eo meno rischi. Possono essere negoziati in da chiamata breve iniziale o grado di creare una posizione ribassista più forte lungo messo. Lunga inversione di rischio - Quando si è rialzista sul mercato e incerto circa la volatilità. Normalmente questa posizione è iniziato come un follow-up a un'altra strategia. La sua riskreward è lo stesso di un future long, tranne che c'è una zona pianeggiante di poca o nessuna gainloss. Breve inversione di rischio - Quando si è ribassista sul mercato e incerto circa la volatilità. Normalmente questa posizione è iniziato come un follow-up a un'altra strategia. La sua riskreward è lo stesso di una breve FUTURES tranne che c'è una zona pianeggiante di poca o nessuna gainloss. Breve chiamata - Quando si è ribassista sul mercato. Vendi uscita of-the-money (superiore strike) mette se si è meno fiduciosi il mercato cadrà, vendere at-the-money mette se si è sicuri il mercato ristagna o caduta. Breve Put - Se si crede fermamente che il mercato non sta andando giù. Sell Out-of-the-money (strike bassa) opzioni se si è solo un po 'convinti, opzioni at-the-money vendere se si è molto fiducioso sul mercato ristagna o aumentare. Se avete dei dubbi di mercato ristagna e sono più bullish, vendere opzioni in-the-money per il massimo profitto. Bull Spread - Se si pensa che il mercato salirà, ma con upside limitato. Buona posizione, se si vuole essere sul mercato, ma sono meno sicuri di aspettative rialziste. Sei in buona compagnia. Questo è il commercio rialzista più popolari. Tenete Spread - Se si pensa che il mercato andrà giù, ma con ribasso limitato. Buona posizione, se si vuole essere sul mercato, ma sono meno sicuri di aspettative ribassiste. La posizione più popolare tra gli orsi perché può essere inserito come un commercio conservatore quando incerto su posizione ribassista. Lungo farfalla - Una delle poche posizioni che possono essere inseriti vantaggiosamente in una serie opzioni a lungo termine. Invio quando, con un mese o più per andare, costo della diffusione è 10 percento o meno di B A (20 per cento se esiste un tiro tra A e B). Questa è una regola di valori teorici di controllo del pollice. Breve Butterfly - Quando il mercato è o al di sotto o al di sopra A C e la posizione è troppo caro, con un mese o giù di lì sinistra. O quando solo poche settimane sono lasciati, il mercato è vicino B, e ci si aspetta una mossa imminente in entrambe le direzioni. Lungo Iron Butterfly - Quando il mercato è o al di sotto o al di sopra A C e la posizione è underpriced con un mese o giù di lì sinistra. O quando solo poche settimane sono lasciati, il mercato è vicino B, e ci si aspetta una mossa breakout imminente in entrambe le direzioni. Breve Iron Butterfly - Invio quando il credito netto di ferro corto Butterflys è di 80 per cento o più di C A, e si prevede un lungo periodo di relativa stabilità dei prezzi qualora il sottostante sarà vicino al punto medio della C Una gamma vicino alla scadenza. Questa è una regola di valori teorici di controllo del pollice. Lungo Straddle - Se il mercato è vicino a A e ci si aspetta di iniziare a muoversi, ma non sono sicuro quale modo. Particolarmente buono posizione se il mercato è stata tranquilla, poi inizia a zig-zag bruscamente, segnalando il potenziale eruzione. Lungo Strangle - Se il mercato si trova all'interno o in prossimità (A-B) serie ed è stato stagnante. Se esplode di mercato in entrambi i casi, si fanno i soldi se il mercato continua a ristagnare, si perde meno con una lunga straddle. Utile anche se la volatilità implicita è destinata ad aumentare. Breve Strangle - Se il mercato si trova all'interno o in prossimità gamma (A-B) e, se attiva, viene calmare giù. Se il mercato va in stagnazione, si fanno i soldi se continua ad essere attivo, si ha un po 'meno il rischio poi con una breve straddle. Rapporto di call spread - Di solito è entrato quando il mercato è vicino A e l'utente si aspetta un lieve a moderato aumento nel mercato, ma vede un potenziale di sell-off. Uno degli spread delle opzioni più comuni, raramente fatto più di 1: 3 (due corti in eccesso) a causa del rischio di rialzo. Rapporto Put Spread - Di solito è entrato quando il mercato è vicino B e si aspetta di mercato a cadere un po 'a moderatamente, ma vedere un potenziale di forte aumento. Uno degli spread delle opzioni più comuni, raramente fatto più di 1: 3 (due corti in eccesso) a causa del rischio di ribasso. Box o di conversione - Di tanto in tanto, un mercato uscirà di linea sufficiente a giustificare una prima messa in una di queste posizioni. Tuttavia, essi sono più comunemente utilizzati per bloccare tutto o parte di un portafoglio acquistando o vendendo per creare le gambe mancanti della posizione. Questi sono alternative alla chiusura le posizioni a prezzi possibilmente sfavorevoli. Sidebar primaria elevare il vostro Trading Perché ho scelto DT ho deciso di tornare in negoziazione dopo un anno di scambio di carta. Ho inviato una e-mail a Daniels che ero interessato a parlare con un rappresentante. Ho ricevuto una telefonata da Brian Cullen x02026 Read More - Mitchell S. Pataskala, Ohio Trustpilot Reviews Ultimi Tweet Impara a usare indicatori CFRN in un contesto di mercato dal vivo nel nostro caso in webinar giovedì, 9 marzo alle 1:00 pm CT. t. cokaGgQZcmat Tempo fa 3 ore via Buffer Prova Risk future su materie prime di libero scambio con un account DT Pro pratica. Attiva il tuo demo qui: t. coHCRLzBvyXv tempo fa 20 ore via Buffer nuovi livelli di buy amp vendere per FSE da MDASnapShot. Ottenere tutti i dettagli commerciali qui: t. coCoXxaWZllH Tempo fa 1 giorno tramite tampone Copyright 2017 xA9 XB7 Daniels Trading. Tutti i diritti riservati. Questo materiale viene convogliato come una sollecitazione per entrare in una transazione derivati. Questo materiale è stato preparato da un broker di trading Daniels che fornisce il commento ricerche di mercato e commerciali raccomandazioni come parte della sua sollecitazione per gli account e sollecitazione per le negoziazioni però, Daniels Trading non mantiene un dipartimento di ricerca di cui CFTC 1.71. Daniels Trading, i suoi presidi, i broker e gli impiegati possono scambi di strumenti derivati per i propri conti o per i conti degli altri. A causa di vari fattori (come la propensione al rischio, i requisiti di margine, gli obiettivi commerciali, a breve termine rispetto a strategie a lungo termine, contro l'analisi tecnica di mercato fondamentale, e di altri fattori), quali il commercio può comportare l'avvio o la liquidazione di posizioni che sono diverse da o in contrasto con le opinioni e le raccomandazioni in essa contenute. Il rendimento passato non è necessariamente indicativo del rendimento futuro. Il rischio di perdita di contratti futures trading o di opzioni su materie prime può essere sostanziale, e quindi gli investitori dovrebbero comprendere i rischi coinvolti nel prendere posizioni leveraged e devono assumersi la responsabilità per i rischi associati a tali investimenti e per i loro risultati. Si dovrebbe considerare attentamente se tale trading è adatto a lei, alla luce delle circostanze e delle risorse finanziarie. Si consiglia di leggere la pagina web informativa sul rischio accede al DanielsTrading nella parte inferiore della home page. Daniels Trading non è affiliato con né sostiene alcun sistema di negoziazione, newsletter o altri servizi simili. Daniels Trading non garantisce o verificare eventuali richieste di prestazioni effettuate da tali sistemi o opzioni service. LIFFE 107297 - Opzioni LIFFE una guida alla negoziazione. Questa è la fine dell'anteprima. Iscriviti per accedere al resto del documento. Non formattato anteprima del testo: Opzioni LIFFE una guida per le strategie di trading LIFFE 2002 Tutti i diritti di proprietà e gli interessi in questa pubblicazione devono essere conferiti a LIFFE Administration and Management (quotLIFFEquot) e tutti gli altri diritti, compresi, ma senza limitazione, brevetti, disegni e modelli registrati, copyright, marchi , marchio di servizio, collegato con questa pubblicazione deve inoltre essere investito in LIFFE. LIFFE CONNECT è un marchio di LIFFE amministrazione e gestione. Nessuna parte di questa pubblicazione può essere ridistribuito o riprodotta in qualsiasi forma e con qualsiasi mezzo o usato per fare qualsiasi lavoro derivato (quali traduzione, trasformazione o adattamento) senza autorizzazione scritta da LIFFE. LIFFE si riserva il diritto di rivedere questa pubblicazione e di apportare modifiche al contenuto di tanto in tanto, senza obbligo da parte del LIFFE per fornire la notifica di tali revisioni o modifiche. Mentre ogni ragionevole cura è stata presa per garantire che le informazioni contenute in questa pubblicazione siano accurate e non fuorvianti al momento della pubblicazione, LIFFE non sarà responsabile (se non nella misura richiesta dalla legge) per l'utilizzo delle informazioni contenute nel presente documento tuttavia derivanti in nessun caso collegati con il commercio reale o in altro modo. Né LIFFE, né i suoi dipendenti, né agenti, è responsabile di eventuali errori od omissioni contenute in questa pubblicazione. Questa pubblicazione è solo informativo e non costituisce un'offerta, una sollecitazione o una raccomandazione ad acquistare o vendere qualsiasi investimento o di impegnarsi in qualsiasi altra transazione. Tutte le informazioni, le descrizioni, esempi e calcoli contenuti in questa pubblicazione sono solo a scopo di orientamento, e non devono essere trattati come definitivi. LIFFE si riserva il diritto di modificare qualsiasi delle sue regole o specifiche del contratto, e un tale evento può influenzare la validità delle informazioni contenute in questa pubblicazione. Coloro che desiderano o al commercio dei futures LIFFE e contratti di opzione o per offrire e vendere ad altri dovrebbe stabilire la posizione regolamentare nella relativa giurisdizione prima di farlo. FLEX è un marchio registrato di Chicago Options Board Exchange Inc. ed è stato concesso in licenza per l'utilizzo da parte LIFFE. quotFTSEquot e quotFootsiequot sono marchi del London Stock Exchange Limited e The Financial Times Limited e sono utilizzati da FTSE International Limited sotto licenza. quotStarsquot è un marchio di FTSE International Limited. quotEurotopquot è un marchio di Euronext NV o delle sue controllate (quotEuronextquot) ed è utilizzato da FTSE International Limited sotto licenza. Il Eurotop 100 Index FTSE è l'interesse di proprietà di Euronext e FTSE International Limited. Tutti i copyright nei valori dell'indice e elenca i costituenti giubbotti di Euronext e FTSE International Limited congiuntamente. Il FTSE 100 Index, l'indice 250 FTSE, l'indice FTSE Eurotop 300, il FTSE Eurotop 300 (Ex UK) Index, l'indice FTSE Euro 100 e l'indice FTSE Star sono la partecipazione di proprietà di FTSE International Limited e sono stati concessi in licenza per l'uso da LIFFE. Tutti i diritti d'autore nei valori dell'indice e le liste costituenti conferiti a FTSE International Limited. Euronext e FTSE International Limited in nessun modo sponsor, approvano o sono altrimenti coinvolte nel numero e offerta di prodotti LIFFE e non accettano alcuna responsabilità in relazione con il commercio di prodotti LIFFE. L'MSCI Euro Index e MSCI Pan-Euro Index (l quotIndicesquot) sono marchi di servizio di Morgan Stanley Capital International Inc. (quotMSCIquot). I marchi di servizio sono stati concessi in licenza da MSCI per l'uso da LIFFE. Nessun contratto di scambio sul Index e MSCI Pan-Euro MSCI Euro è sponsorizzato, garantito o approvato da MSCI. MSCI non fornisce alcuna garanzia in merito all'opportunità di utilizzare tali contratti di cambio. MSCI non fa alcuna dichiarazione in merito alla accuratezza o la completezza degli Indici o parte dei loro dati costitutivi. MSCI non fornisce alcuna garanzia per scopo o per qualsiasi uso a cui gli indici o scambio contratti di esso può essere messo o per quanto riguarda la validità o meno delle informazioni pubblicate dalla Borsa in relazione a tutti gli aspetti dei contratti stipulati nei termini di tale un contratto di scambio. Senza limitazione di quanto precede, in nessun caso MSCI avere alcuna responsabilità per danni diretti, indiretti, speciali o indiretti, inclusa la perdita di profitto. Swapnote è un marchio registrato di ICAP plc ed è stato concesso in licenza per l'utilizzo da parte LIFFE. Il design del contratto Swapnote e l'algoritmo sono protetti da brevetto (US 6.304.858 B1), di proprietà di Adams, Viner e Mosler Ltd. (AVM) ed è concesso in licenza esclusiva a LIFFE in tutto il mondo. Sommario opzioni Pagina Introduzione LIFFE contratti 3 strategie riconosciuti 5 opzioni di base di teoria 7 Note sulla costruzione strategia 10 Opzioni LIFFE Strategie 1. Call lungo 11 2. Breve chiamata 12 3. Lungo Put 13 4. Breve Put 14 5. Lunga call spread 15 6. breve put Stendere 16 7. breve call spread 17 8 put lunghi diffuse in 18 9. lungo Combo 19 10. breve Combo 20 11. lunghi a cavalletto 21 12. brevi a cavalletto 22 13. lunghe strangolare 23 14. brevi strangolare 24 15. lunghi Guts 25 16. brevi Guts 26 17. lungo Buttery 27 18. breve Buttery 28 19. lungo Condor 29 20. breve Condor 30 21. ferro lungo Buttery 31 22. ferro corto Buttery 32 23. ferro lungo Condor 33 1 Page 24. ferro corto Condor 34 25. Call lungo striscia di 35 26. breve chiamata Striscia 36 27. lungo Mettere striscia di 37 28. breve Mettere striscia di 38 29. lungo Calendario Diffusione 39 30. lungo calendario diagonale Diffusione 40 31. lungo Calendario Straddle Ala 41 32. lungo Straddle Diagonal Calendario Diffusione 42 33. lungo Jelly roll 43 34. lungo Straddle (Calendario) Striscia 45 36. lungo Due da One ratio call spread 46 37. breve due da un rapporto di call spread 47 38. lungo due a mettere uno Rapporto Stendere 48 39. breve Due per Uno Rapporto put Ala 49 40. Call lungo Ladder 50 41. breve chiamata Ladder 51 42. lungo put Ladder 52 43. breve put Ladder 53 44. sintetico lungo sottostante 54 45. sintetico breve sottostante 55 46. lungo call spread contro mettere 56 47. breve call spread rispetto put 57 48. put lunghi diffuse rispetto a chiamata 58 49. put breve Stendere contro chiamata 59 50. lungo forca contro chiamata 60 51. breve forca contro chiamata 61 52. lungo forca contro put 62 53. breve straddle contro Put 63 54. volatilità lungo commerciale 64 55. volatilità a breve commerciale 65 56. ConversionReversal 66 57. Delta Strategie Neutro 2 44 35. lungo area 67 Introduzione Eventi negli ultimi anni hanno messo in evidenza la volatilità e l'incertezza che è una caratteristica intrinseca di oggi mercati finanziari. LIFFEs vasta gamma di strategie di opzioni fornisce non solo per una vasta gamma di punti di vista e consente agli utenti di far leva, ma offre i vantaggi di esecuzione all'interno di una singola transazione, consentendo spread competitivi e le spese di transazione di scambio ridotti. Salvo diversa indicazione, le strategie in questa guida si applicano a tutti LIFFEs opzioni su tassi di interesse a breve termine, i futures sui titoli di Stato e swap, futures delle materie prime, indici azionari e le singole azioni. Opzioni LIFFE - una guida per strategie di trading mostra quando e come LIFFEs riconosciuti strategie di trading opzione può essere utilizzata. Ogni strategia è illustrata con prot e perdite proletari, oltre a dettagli di caratteristiche di decadimento e alle sensibilità del mercato. Opzioni LIFFE contratti di opzione sono disponibili i seguenti contratti LIFFE: opzioni su future su tassi di interesse a breve termine di tre mesi sterlina di tre mesi Euro (Euribor) di tre mesi Euro (LIBOR) di tre mesi Opzioni Euroswiss su futures sui titoli di Stato tedeschi Government Bond (Bund) a lungo Gilt opzioni su futures Swapnote biennale euro Swapnote quinquennale euro Swapnote decennale Euro Opzioni Swapnote su Indici FTSE 100 (American-Style) FTSE 100 (European-Style) FTSE 100 FLEX FTSE Eurotop 100 MSCI Euro MSCI Pan-Euro singolo strumento di capitale opzioni opzioni non finanziari Futures cacao Robusta caffè zucchero bianco grano 3 opzioni seriali Liffe opzioni seriali sono brevi opzioni di scadenza mensile datati. Questi hanno il Benet di premi più bassi, può essere utilizzato come uno strumento di precisione per la gamma, Vega e theta esposizioni di copertura e in aggiunta fornire opportunità-spread trading contro opzioni datati più lunghi. Esercizio di un serial opzione scadenza mese comporterà l'assegnazione di una posizione a termine nella vicina mese di consegna trimestrale (ad esempio dell'esercizio di un'opzione di serie luglio si determinerà l'attribuzione di una posizione in futures settembre). sono disponibili i seguenti contratti LIFFE opzioni seriali: governo tedesco Bond (Bund) futuro a lungo Gilt futuro Euribor a tre mesi opzioni futuro di due anni euro Swapnote quinquennale euro Swapnote Decennale euro Swapnote Mid-Curve Opzioni LIFFE Mid-Curve sono brevi opzioni - dated con un lungo datata (Red mese) contratto future come sottostante. Fornire l'esposizione a più lunga scadenza di opzioni vanilla LIFFE, opzioni Mid-Curve mostrano una maggiore volatilità implicita, una maggiore decadimento tempo e più alto Vega rispetto ai loro omologhi di opzione a lunga scadenza tradizionali. Inoltre, le opzioni Mid-Curve richiedono meno premio rispetto alle opzioni più lunga scadenza e in genere mostrano maggiore gamma e theta. sono disponibili con marzo, giugno, settembre e dicembre cicli di scadenza, con due mesi di serie opzioni LIFFE Mid-Curve, in modo tale che quattro mesi di scadenza sono disponibili per la negoziazione, con la più vicina tre mesi di scadenza essendo consecutivi mesi di calendario. Un anno Opzioni Mid-Curve sono disponibili sui seguenti LIFFE contratti a termine: di tre mesi Euro (Euribor) strategie di tre mesi Sterling 4 Riconosciuto strategie LIFFEs riconosciuti beneficiano di riduzione delle tasse di transazione. Tutti i componenti della strategia devono essere prenotati a un singolo account. LIFFE non permette la fusione di business da diversi clienti per compensare un lato del commercio. Opzione Solo Strategie Le seguenti strategie sono composti solo di componenti opzionali: LIFFE TRS CONNECT strategia strategia codice di chiamata (Put) Diffusione DD Combo JJ Straddle SS Strangle KK Guts GG Buttery BB Condor WW Ferro Buttery II Ferro Condor w 5 chiamate Striscia MM Put Striscia MM Calendario Diffusione EE diagonale Calendario Diffusione FF Straddle Calendario diffusione NN diagonale Straddle Calendario Diffusione PP Jelly roll AA Straddle Striscia MM Box XX Due da One ratio Call (put) Diffusione HH Ladder LL sintetico sottostante rr call spread vs put x 1 put Diffusione vs chiamate y 3 Straddle vs Call (Put) z 7 5 Delta strategie neutrali Oltre alle strategie di cui sopra, LIFFE permette opzioni e futures per essere combinati in un'unica strategia, scambiato attraverso LIFFE CONNECT. Per le opzioni di equità, le opzioni sono combinati con un commercio nel sottostante o, in alternativa l'opzione possono essere combinati con un commercio nel contratto universale Stock Futures dove questa è disponibile. strategie neutrali Disponibile delta sono: LIFFE Volatilità commerciale ConversionReversal Call (Put) Diffusione vs Straddle sottostante vs Scala sottostante vs sottostante Combo vs sottostante Calendario Diffusione vs sottostante Due per uno spread rapporto vs sottostante call spread vs Put vs Put sottostante Stendere vs chiamate vs Alla base di 6 TRS CONNECT strategia strategia codice VR codice dsajehcp opzione teoria VRVVVVVVVV base in, in e out-of-the-money un'opzione call è in-the-money quando il prezzo del sottostante è superiore al prezzo di esercizio delle opzioni, ed è out-of the-money quando il prezzo del sottostante è inferiore al prezzo di esercizio delle opzioni. Un'opzione put è in-the-money quando il prezzo del sottostante è inferiore al prezzo di opzioni di esercizio, ed è out-of-the-money quando il prezzo del sottostante è superiore al prezzo di esercizio delle opzioni. Un'opzione è at-the-money quando il prezzo del sottostante è pari al prezzo di esercizio delle opzioni. In pratica l'opzione con il prezzo di esercizio più vicino al prezzo del sottostante prevalente è chiamato l'opzione in-the-money. Intrinseco e valore temporale Il prezzo dell'opzione, o premio, può essere considerato come la somma di due elementi speciche: valore intrinseco e valore temporale. Valore intrinseco Il valore intrinseco di un'opzione è la quantità titolare opzione può realizzare esercitando immediatamente l'opzione. Il valore intrinseco è sempre positivo o zero. Un'opzione out-of-the-money ha zero valore intrinseco. valore intrinseco in-the-money call sottostante prezzo del prodotto - prezzo di esercizio valore intrinseco in-the-money put strike price - prezzo valore del prodotto Tempo sottostante Il valore temporale di un'opzione è il valore al di là del valore intrinseco che la luoghi di mercato sulla possibilità. Può essere considerato come il valore della continua esposizione al movimento del prezzo prodotto sottostante che l'opzione fornisce. Il prezzo che il mercato mette su questo valore temporale dipende da una serie di fattori: il tempo di scadenza, la volatilità del prezzo del prodotto di base, senza rischi tassi di interesse e dividendi attesi. Tempo di scadenza Tempo ha valore, poiché il più la possibilità deve andare fino alla scadenza, più possibilità c'è per il prezzo del sottostante di passare ad un livello tale che l'opzione diventa in-themoney. Generalmente, più lungo è il tempo di scadenza, maggiore è il valore di opzioni di tempo. Come scadenza si avvicina, il valore di un'opzione tende a zero, e il tasso di tempo di decadimento accelera. Time Value tempo curva del valore di decadimento mesi a scadere scadenza 7 Volatilità La volatilità di un'opzione è una misura della diffusione dei movimenti di prezzo dello strumento sottostante. Il più volatile dello strumento sottostante, maggiore è il valore temporale dell'opzione sarà. Questo significa maggiore incertezza per il venditore dell'opzione che, si carica un premio elevato per compensare. I prezzi delle opzioni aumentano con l'aumentare della volatilità e diminuiscono la volatilità scende. Effetto della volatilità increasedecrease sulla lunga straddle profitto Volatilità aumento Volatilità perdita di calo dei prezzi Sottostante Scadenza, zero sensibilità volatilità Opzione In tutto questo opuscolo, gli esempi di strategia riferimento alla sensibilità del mercato delle opzioni coinvolti. Queste sensibilità sono comunemente noti come i greci e questi sono denita seguito. Delta: misura la variazione del prezzo dell'opzione per una data variazione del prezzo del sottostante e consente quindi l'esposizione del sottostante da determinare. Il delta è compreso tra 0 e 1 per le chiamate e tra 0 e -1 per la posa (quindi un'opzione call con un delta di 0,5 aumenterà di prezzo da 1 tick per ogni aumento di 2 tick nel sottostante). Gamma: misura la variazione del delta per una data variazione nel sottostante. (Ad esempio, se una cali ha un delta di 0,5 e una gamma di 0,05, questo indica che il nuovo delta sarà 0,55 se il prezzo del sottostante si muove su di un punto pieno e 0.45 se il prezzo del sottostante scende di un punto pieno). Theta: misura l'effetto del tempo di decadimento su un'opzione. Col passare del tempo, le opzioni perderanno valore del tempo e il theta indica la portata di questo decadimento. Sia opzioni call e put sono attivi sprecare e quindi hanno un theta negativo. Si noti che il decadimento delle opzioni è non lineare dal fatto che il tasso di decadimento accelererà come opzione avvicina di scadenza. Come risulta dalla tabella che segue illustra, il theta raggiungerà il suo valore più alto subito prima della scadenza. Vega: misura l'effetto che un cambiamento della volatilità implicita ha su un prezzo opzioni. Entrambe le chiamate e mette tenderanno ad aumentare di valore come volatilità aumenta, in quanto questo aumenta la probabilità che l'opzione si muoverà in-the-denaro. Entrambe le opzioni call e put saranno quindi in possesso di un vega positivo. 8 In questa brochure, alle sensibilità del mercato vengono visualizzati per ogni strategia, sotto forma di una tabella in base alla posizione a 30 giorni della scadenza. Questo dimostra la sensibilità approssimative per quando il sottostante è at-the-money, così come quando si alza sottostanti e cadute. Le tabelle mostrano la sensibilità di una posizione, come illustrato di seguito: 0 ---- altamente positivo positivo leggermente positivo neutro leggermente negativo negativo fortemente negativo Sotto la tabella sensibilità per ogni strategia di opzione, ci sono brevi spiegazioni dei movimenti sensibilità delle opzioni tra cui una breve descrizione dei qualsiasi scostamento dalla tabella sensibilità che potrebbero verificarsi (ad esempio quando la posizione è più vicina alla scadenza). Notare che le tabelle le sensibilità non sono destinati ad essere una guida alle negoziazione. Essi sono progettati per dare un'indicazione di come i movimenti del sottostante cambierà la sensibilità generale e relative di mercato di una posizione. Sintesi di opzioni e future su valori greci singole posizioni di opzione, per esempio opzioni call longshort, hanno i propri valori greci particolari. La tabella seguente riassume questi valori: Variazioni valori Delta posizione al di sotto chiamata sciopero alla Gamma sopra sciopero sciopero sotto a teta sopra sciopero sciopero sciopero di seguito a sciopero sciopero Vega sopra sotto sciopero sciopero sciopero - - - in caso di urto sopra - chiamare - - - - - --- - - - - put --- - - - - - - put - --- - - - - futuro na na na na na na na na na - futuro - - --- na na na na na na na na na --- 9 Putcall parità di particolare importanza per quanto riguarda i traffici di arbitraggio è il concetto di parità putcall. Questo è il rapporto che esiste tra call e put. Essa afferma che il valore di una chiamata (put) può essere derivato dal valore di una put (call) con lo stesso prezzo di esercizio, data di scadenza e il prezzo del sottostante. Quindi, per le opzioni LIFFE su futures: CPF-X dove: C prezzo chiamata P Prezzo put future F prezzo di X prezzo di esercizio NB Questo presuppone non ci sono costi di trasporto per le opzioni (che è il caso per LIFFEs attuale gamma di opzioni su futures dove premium non è pagato in anticipo). Un prezzo di parità putcall per il premio le opzioni anteriori (come LIFFEs FTSE 100 Index Options) può essere trovato modificando leggermente questa formula. mestieri arbitraggio, come quelli mostrati in questa guida, si basano sulle relazioni che esistono tra alcune posizioni utilizzando opzioni e futures. Indicato come posizioni sintetiche, sono derivati da put-call parity e, utilizzando questo rapporto, è possibile effettuare un arbitraggio tra le posizioni sintetici e loro equivalenti a titolo definitivo. Note sulla proles costruzione strategia Protloss: proletari Protloss sono illustrati per ciascuna strategia, se possibile. Gli spettacoli asse verticale prot di sopra della linea di pareggio orizzontale, e la perdita di sotto della linea di pareggio. L'asse orizzontale rappresenta il prezzo dello strumento sottostante (passando da sinistra a destra). Tutti i potenziali Prot e perdita di risultati a scadenza sono mostrati in linee continue e gli effetti del tempo di decadimento sono illustrate con proletari a tre mesi della scadenza (leggermente tratteggiata linee) e ad un mese della scadenza (linee tratteggiate pesante). Va notato che tutti i proletari protloss e le spiegazioni non includono le spese di commissione, i costi di requisiti di margine, e altre spese di esecuzione. Denizione di at-the-money: Ai fini di questi esempi, il livello di at-the-money è considerato essere dove il prezzo del sottostante è pari al prezzo di esercizio del contratto di opzione. Per le strategie simmetriche composti da due colpi, il livello di at-the-money è considerato il punto medio tra i due prezzi di esercizio. Effetto del tempo: La strategia opzione è analizzato da un punto nel tempo di 30 giorni dalla scadenza. Si noti che il valore di alcuni greci può cambiare la posizione avvicina di scadenza. Per le strategie di opzione basata Calendario (vedi strategie 29-34), l'effetto del tempo di decadimento è particolarmente importante. 10 LIFFE Opzione Strategie 1. Lunga chiamata 1 mese a scadere 3 mesi a scadenza scadenza prezzo profitto di perdita sottostante A Il commercio: Acquistare una chiamata con un prezzo di esercizio di (A). Aspettativa di mercato: bullishvolatility mercato rialzista. Il più bullish l'aspettativa, l'ulteriore out-of-the-money (strike superiore) la chiamata dovrebbe essere acquistato. Una chiamata a lunga esposizione unisce ribasso limitato ad alto ingranaggi in un mercato in crescita. Prot e caratteristiche di perdita a scadenza: Prot: illimitato in un mercato in crescita. Perdita: limitato al premio iniziale. Break-even: raggiunto quando il sottostante supera il prezzo di esercizio A, per lo stesso importo, come il premio pagato per stabilire la posizione. sensibilità del mercato a 30 giorni di tempo per scadenza: sottostante giù at-the-money fino delta gamma theta - - - Vega Delta: aumenta verso 1 come sottostante aumenta e la chiamata si muove in-the-money. Gamma: Massima intorno al livello di at-the-money, in particolare quando l'opzione è prossima alla scadenza. Theta: Valore della posizione diminuirà come opzione perde valore temporale. Vega: Valore della posizione tenderà ad aumentare se previsto un aumento della volatilità. Vega sarà più alto quanto più il sottostante è allo sciopero, e il più lungo è il tempo di maturità. 11 2. Breve Chiamata 1 mese a 3 mesi di scadenza della scadenza di scadenza Un prezzo profitto di perdita sottostante Il commercio: vendere una chiamata (A). Aspettativa di mercato: bearishvolatility mercato ribassista. Holder si aspetta un graduale calo del mercato e volatilità inferiore. Lo sciopero ottimale dipende dal tempo di decadimento e il livello di Vega anche se, in generale, più al ribasso l'attesa, maggiore è l'opzione venduta deve essere in-the-money (strike inferiore) al fine di massimizzare la raccolta premi. L'utile è limitata al premio ricevuto e, quindi, se la vista del mercato è più che moderatamente ribassista, un Put lungo può cedere profitti più elevati. Profit caratteristiche di perdita amplificatore a scadenza: Profitto: limitato al premio ricevuto dalla vendita della chiamata. Perdita: illimitata in un mercato in crescita. Break-even: raggiunto quando il sottostante supera il prezzo di esercizio A, per lo stesso importo, come il premio ricevuto dalla vendita della chiamata. sensibilità del mercato a 30 giorni di tempo per scadenza: sottostante giù at-the-money su Delta - - --- gamma - --- - theta Vega - - - Delta: diminuisce verso -1 come gli aumenti sottostanti e la venduti opzione consente di spostare in-themoney. Gamma: Massima intorno al livello di at-the-money, in particolare quando l'opzione è prossima alla scadenza. Theta: Valore della posizione aumenterà come opzione venduta perde valore temporale. Vega: Valore della posizione tenderà a scendere se previsto un aumento della volatilità. Vega sarà più alto quanto più il sottostante è allo sciopero, e il più lungo è il tempo di maturità. 12 3. Lungo Put 1 mese a scadenza 3 mesi a scadenza scadenza prezzo profitto di perdita sottostante A Il commercio: Acquista un put (A). Aspettativa di mercato: bearishvolatility mercato rialzista. Il più al ribasso le aspettative, l'ulteriore out-of-the-money (strike inferiore) put acquistata dovrebbe essere. Un Put lungo combina limitata esposizione a testa alta con ingranaggi in un mercato in calo. Prot e caratteristiche di perdita a scadenza: Prot: praticamente illimitata in un mercato in calo. Perdita: limitata al premio iniziale pagato. Break-even: raggiunto quando sottostante scenda al di sotto del prezzo d'esercizio A per lo stesso importo il premio pagato per stabilire la posizione. sensibilità del mercato a 30 giorni di tempo per scadenza: sottostante giù at-the-money Delta --- - up - gamma theta - - - Vega Delta: diminuisce verso -1 come le cascate di base e l'opzione si muove in-the-money. Gamma: Massima intorno al livello di at-the-money, in particolare quando l'opzione è prossima alla scadenza. Theta: Valore della posizione diminuirà come opzione perde valore temporale. Vega: Valore della posizione tenderà ad aumentare se previsto un aumento della volatilità. Vega sarà più alto quanto più il sottostante è allo sciopero, e il più lungo è il tempo di maturità. 13 4. Breve Put 1 mese a scadenza 3 mesi alla scadenza di scadenza Un prezzo profitto di perdita sottostante Il commercio: Vendi un put (A). Aspettativa di mercato: bullishvolatility mercato ribassista. Holder si aspetta un aumento graduale nel mercato con minore volatilità. Lo sciopero ottimale per essere venduto sarà dipendente dal tempo di decadimento e il livello di Vega, anche se in generale, più bullish la vista, tanto maggiore è la possibilità venduti dovrebbe essere in-the-money (superiore sciopero) al fine di massimizzare la raccolta premi. Prot è limitato al premio ricevuto e, quindi, se la vista del mercato è più che moderatamente rialzista, una lunga chiamata può cedere Prots più elevati. Caratteristiche Prot perdita amplificatore a scadenza: Prot: limitata al premio ricevuto dalla vendita della put. Perdita: illimitata in un mercato in calo. Break-even: raggiunto quando sottostante scenda al di sotto del prezzo d'esercizio A per lo stesso importo il premio ricevuto dalla vendita della put. sensibilità del mercato a 30 giorni di tempo per scadenza: sottostante giù at-the-money fino delta gamma - --- - theta Vega - - - Delta: aumenta verso 1, come le cascate di base e le mosse di opzione venduti in-themoney. Gamma: Massima intorno al-the-money e prossima alla scadenza. Theta: Valore della posizione aumenterà come opzione venduta perde valore temporale. Vega: Valore della posizione diminuisce con l'aumentare della volatilità attesa. Vega sarà più alto quanto più il sottostante è allo sciopero, e il più lungo è il tempo di maturità. 14 5. Lunga call spread 1 mese a scadenza 3 mesi a scadenza scadenza B prezzo profitto di perdita sottostante codice A LIFFE CONNECT strategia: D. Il commercio: Comprare una chiamata (A), vendita di chiamare a più alto sciopero (B). Aspettativa di mercato: bullishvolatility mercato neutrale. La diffusione ha il vantaggio di essere più economico di stabilire che l'acquisto di una singola chiamata, come il premio ricevuto dal call venduta riduce il costo complessivo. Lo spread offre un potenziale prot limitata se gli aumenti di fondo e una perdita limitata se le cascate sottostanti. Prot and loss characteristics at expiry: Prot: Limited to the difference between the two strikes minus net premium cost. Maximum prot occurs where the underlying rises to the level of the higher strike B or above. Loss: Limited to any initial premium paid in establishing the position. Maximum loss occurs where the underlying falls to the level of the lower strike A or below. Break-even: Reached when the underlying is above strike A by the same amount as the net cost of establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta gamma 0 - theta - 0 vega 0 - Delta: The highest level will be between the strikes A-B. Below strike A or above strike B, the delta will tend to fall towards zero. Gamma: Positive if underlying closer to strike A, negative if underlying closer to strike B, neutral if around midpoint A-B. Theta: Negative if underlying closer to strike A, positive if underlying closer to strike B, neutral if around midpoint A-B. Vega: Positive if underlying closer to strike A, negative if underlying closer to strike B, neutral if around midpoint of A-B. NB The long call spread and the short put spread create near identical positions. 15 6. Short Put Spread 1 month to expiry 3 months to expiry expiry B profit price of underlying loss A LIFFE CONNECT Strategy code: D. The trade: Sell a put (B), buy put at a lower strike (A). Market expectation: Market bullishvolatility neutral. The Short Put at B aims to take advantage of a bullish market and the premium gained affords some downside protection with a Long Put at A. The spread offers a limited prot potential if the underlying rises and a limited loss if the underlying falls. Prot and loss characteristics at expiry: Prot: Limited to the net premium credit. Maximum prot occurs where underlying rises to the level of the higher strike B or above. Loss: Maximum loss occurs where the underlying falls to the level of the lower strike A or below. Break-even: Reached when the underlying is below strike B by the same amount as the net credit of establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta gamma 0 - theta - 0 vega 0 - Delta: The highest level will be between the strikes A-B. Below strike A or above strike B, the delta will tend to fall towards zero. Gamma: Positive if underlying closer to strike A, negative if underlying closer to strike B, neutral if around midpoint of A-B. Theta: Negative if underlying closer to strike A, positive if underlying closer to strike B, neutral if around midpoint of A-B. Vega: Positive if underlying closer to strike A, negative if underlying closer to strike B, neutral if around midpoint of A-B. 16 7. Short Call Spread 1 month to expiry 3 months to expiry expiry profit A price of underlying loss B LIFFE CONNECT Strategy code: D. The trade: Sell a call (A), buy call at higher strike (B). Market expectation: Market bearishvolatility neutral. The Short Call at A aims to take advantage of a bearish market and the premium gained affords some upside protection with a Long Call at B. The spread offers a limited prot if the underlying falls and a limited loss exposure if the underlying rises. Prot amp loss characteristics at expiry: Prot: Limited to the net premium credit. Maximum prot occurs where underlying falls to the level of the lower strike A or below. Loss: Limited to the difference between the two strikes minus the net credit received in establishing the position. Maximum loss occurs where the underlying rises to the level of the higher strike B or above. Break-even: Reached when the underlying is above strike price A by the same amount as the net credit of establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta - -- - gamma - 0 theta 0 - vega - 0 Delta: The highest level will be between the strikes A-B. Below strike A or above strike B, the delta will tend to fall towards zero. Gamma: Negative if underlying closer to strike A, positive if underlying closer to strike B, neutral if around midpoint of A-B. Theta: Positive if underlying closer to strike A, negative if underlying closer to strike B, neutral if around midpoint of A-B. Vega: Negative if underlying closer to strike A, positive if underlying closer to strike B, neutral if around midpoint of A-B. NB: The Short call spread and the long put spread create near identical positions. 17 8. Long Put Spread 1 month to expiry 3 months to expiry expiry profit A price of underlying loss B LIFFE CONNECT Strategy code: D. The trade: Buy a put (B), sell put at lower strike (A). Market expectation: Market bearishvolatility neutral. The spread has the advantage of being cheaper to establish than the purchase of a single put, as the premium received from the sold put reduces the overall cost. The spread offers a limited loss exposure if the underlying rises, and a limited prot if the underlying falls. Prot amp loss characteristics at expiry: Prot: Limited to the difference between the two strikes minus net premium cost. Maximum prot occurs where underlying falls to the level of the lower strike A or below. Loss: Limited to the initial premium paid in establishing the position. Maximum loss occurs where the underlying rises to the level of the higher strike B or above. Break-even: Reached when the underlying is below strike price B by the same amount as the net cost of establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta - -- - gamma - 0 theta 0 - vega - 0 Delta: The highest level will be between the strikes A-B. Below strike A or above strike B, the delta will tend to fall towards zero. Gamma: Negative if underlying closer to strike A, positive if underlying closer to strike B, neutral if around midpoint of A-B. Theta: Positive if underlying closer to strike A, negative if underlying closer to strike B, neutral if around midpoint of A-B. Vega: Negative if underlying closer to strike A, positive if underlying closer to strike B, neutral if around midpoint of A-B. 18 9. Long Combo 1 month to expiry 3 months to expiry expiry profit B price of underlying A loss LIFFE CONNECT Strategy code: J. The trade: Sell a call (B), buy put at lower strike (A). Has same prole as synthetic split strike short future. Market expectation: Market bearishvolatility neutral. The riskreward prole is similar to that of a short future except that there is a plateau (A-B) over which there will be no change in protloss. The plateau makes this a more suitable trade than a short future if volatility expectations are uncertain. Prot amp loss characteristics at expiry: Prot: Unlimited in a falling market. Loss: Unlimited in a rising market. Break-even: Depending on the strikes chosen, the position may yield a small premium cost or credit. If the position is established at a net cost, break-even will occur where the market falls below point A by the same amount. If the position is established at a credit, break-even will occur where the market rises above point B by the same amount. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta - - - gamma 0 - theta - 0 vega 0 - Delta: The further the position from A or B, the nearer the delta will be towards -1. Gamma: Positive at A, negative at B, neutral around midpoint of A-B. Theta: Slightly negative at A, slightly positive at B, neutral around midpoint of A-B. Vega: Slightly positive at A, slightly negative at B, neutral around midpoint of A-B. 19 10. Short Combo 1 month to expiry 3 months to expiry expiry profit A price of underlying B loss LIFFE CONNECT Strategy code: J. The trade: Buy a call (B), sell put at lower strike (A). Same prole as synthetic split strike long future. Market expectation: Market bullishvolatility neutral. The riskreward prole is similar to that of a long future except that there is a plateau (A-B) in which there is no change in protloss. The plateau makes this a more suitable trade than a long future if volatility expectations are uncertain. Prot amp loss characteristics at expiry: Prot: Unlimited in a rising market. Loss: Unlimited in a falling market. Break-even: Depending on the strikes chosen, establishing the position may yield a small premium cost or credit. If the position is created at a cost, break-even will occur where the market rises above point B by this amount. If the position is established at a credit, the break-even point will occur if the market falls below point A by the same amount. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta gamma - 0 theta 0 - vega - 0 Delta: The further the position is from A or B, the nearer the delta will move towards 1. Gamma: Negative at A, positive at B, neutral around midpoint of A-B. Theta: Slightly positive at A, slightly negative at B, neutral around the mid point A-B. Vega: Slightly negative at A, slightly positive at B, neutral around midpoint of A-B. 20 11. Long Straddle 1 month to expiry 3 months to expiry expiry profit price of underlying ATM loss A LIFFE CONNECT Strategy code: S. The trade: Buy a put (A), buy call at same strike. Market expectation: Market neutralvolatility bullish. With the underlying at A and an unknown directional move or increase in volatility is anticipated. Prot amp loss characteristics at expiry: Prot: Unlimited for an increase or decrease in the underlying. Loss: Limited to the premium paid in establishing the position. Will be greatest if the underlying is at strike A, at expiry. Break-even: Reached if the underlying rises or falls from strike A by the same amount as the premium cost of establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta -- 0 gamma theta - --- - vega Delta: Neutral (assumed at-the-money position), becomes highly positive (negative) for large increases (decreases) in underlying. As a volatility trade, the position would be kept delta neutral with dynamic hedging until it is closed out or is altered to take account of a clear change of market direction. Gamma: Highest when at-the-money and approaching expiry. Theta: Value of position will decrease as the options lose time value. Theta may be positive if the position is far in-the-money andor close to expiry. Vega: Value of position will increase as expected volatility increases. 21 12. Short Straddle 1 month to expiry 3 months to expiry expiry A profit price of underlying ATM loss LIFFE CONNECT Strategy code: S. The trade: Sell a put (A), sell call at same strike. Market expectation: Market neutralvolatility bearish. With the underlying at A and a period of low or decreasing volatility is anticipated, and the underlying is not expected to move dramatically. Prot amp loss characteristics at expiry: Prot: Limited to the credit received from establishing the position. Highest if the market settles at A. Loss: Unlimited for both an increase or decrease in the underlying. Break-even: Reached if the underlying rises or falls from strike A by the same amount as the premium received from establishing the position. Market sensitivity at 30 days to expiry: underlying down at-the-money up delta 0 -- gamma -- --- -- theta vega - -- - Delta: Neutral (presumed at-the-money position), becomes highly negative (positive) for large increases (decreases) in the underlying. As a volatility trade, the position would be kept delta neutral with dynamic hedging until it is closed out or is altered to take account of a clear change of market direction. Gamma: Highest when at-the-money and approaching expiry. Theta: Value of position will increase as the options lose time value. Theta may be negative if the position is far out-of-the-money andor close to expiry. Vega: Value of position will decrease as expected volatility increases. 22 13. Long Strangle 1 month to expiry 3 months to expiry expiry profit price of underlying ATM loss A B LIFFE CONNECT Strategy code: K. The trade: Buy a put (A), buy a call at higher strike (B). Market expectation: Market neutralvolatility bullish. The holder expects a major movement in the market but is unsure as to its direction. A larger directional move is needed than a straddle in order to yield a prot but if the market stagnates, losses will be less. Prot amp loss characteristics at expiry: Prot: The prot potential is unlimited although a substantial directional movement is necessary to yield a prot for both a rise or fall in the underlying. Loss: Occurs if the market is static limited to the premium paid in establishing the position. Break-even: Occurs if the market rises above the higher strike price at B by an amount equal to the cost of establishing the position, or if the market falls below the lower strike price at A by the amount equal to the cost of establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta -- 0 gamma theta - -- - vega Delta: Neutral (presumed at-the-money position), becomes highly positive (negative) for large increases (decreases) in underlying. Gamma: Will be highest at strikes A and B but will tend to decrease as the underlying falls or rises signicantly. Theta: Time decay will act against the holder of the position. Vega: The position will increase in value as volatility rises. NB: Whilst the expiry prole is similar to that of the Long Guts, the difference relates to premium outlay. With the Long Strangle strategy you are buying two out of-the-money options (with a Long Guts both options are in the-money). 23 14. Short Strangle 1 month to expiry 3 month to expiry expiry profit A B price of underlying ATM loss LIFFE CONNECT Strategy code: K. The trade: Sell a put (A), sell call at higher strike (B). Market expectation: Direction neutralvolatility bearish. The holder expects low volatility and no major directional move. More cautious than a straddle as prot potential spans a larger range although maximum potential prots will be lower. Prot amp loss characteristics at expiry: Prot: Limited to the premium received. Will be highest if the underlying remains within the market level A-B. Loss: Unlimited for a sharp move in the underlying in either direction. Break-even: reached if the underlying falls below strike A or rises above strike B by the same amount as the premium received in establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta 0 -- gamma -- --- -- theta vega - -- - Delta: Neutral (presumed at-the-money position), becomes highly negative (positive) for large increases (decreases) in the underlying. Gamma: Highest at strikes A and B but will tend to decrease as the underlying falls or rises signicantly. Theta: Increase in value as options decay. Vega: Value of position will decrease as volatility increases. NB: Whilst the expiry prole is similar to that of the Long Guts, the difference relates to premium outlay. With the Long Strangle strategy you are selling two out of-the-money options (with a Long Guts both options are in the-money). 24 15. Long Guts 1 month to expiry 3 months to expiry expiry profit ATM price of underlying loss B A LIFFE CONNECT Strategy code: G. The trade: Buy a call (A), buy put at higher strike (B). Market expectation: Market neutralvolatility bullish. The market is at, or about the A-B range and a large directional move in the underlying is anticipated. Position has characteristics comparable to an in-the-money strangle. Prot amp loss characteristics at expiry: Prot: Unlimited in a rising or falling market. A substantial directional movement is required however. Loss: Limited to the initial premium paid less the difference between A and B occurs if the underlying remains within the range A-B. Break-even: Reached if the underlying rises above the higher strike price B by the amount equal to the cost of establishing the position less A-B, or if the underlying falls below the lower strike price A by the amount equal to the cost of establishing the position less A-B. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta -- 0 gamma theta - -- - vega Delta: Neutral (presumed at-the-money position). Becomes highly positive (negative) for large increases (decreases) in the underlying. Gamma: Will be highest between strikes A and B and approaching expiry. Theta: Value of position will decrease as options lose time value. Vega: Value of position will increase as implied volatility increases. NB: Whilst the expiry prole is similar to that of the Long Strangle, the difference relates to premium outlay. With the Long Guts strategy you are buying two in-the-money options (with a Long Strangle both options are out-of-the-money). 25 16. Short Guts 1 month to expiry 3 months to expiry expiry profit A B price of underlying ATM loss LIFFE CONNECT Strategy code: G. The trade: Sell a call (A), sell a put at higher strike (B). Market expectation: Direction neutralvolatility bearish. In this case the underlying is at, or about the A-B range and is expected to remain within this band. Prot amp loss characteristics at expiry: Prot: Limited to the net premium received less the difference between A and B occurs if the underlying remains within the range A-B. Loss: Unlimited in a rising or falling market. A substantial directional movement is required however. Break-even: Reached if the underlying falls below the lower strike price A by the amount equal to the premium received from establishing the position less A-B, or if the underlying rises above strike price B by the amount equal to the premium received from establishing the position less A-B. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta 0 -- gamma -- --- -- theta vega - -- - Delta: Neutral (presumed at-the-money position). Becomes highly negative (positive) for large increases (decreases) in the underlying. Gamma: Will be highest between strikes A and B and approaching expiry. Theta: Value of position will increase as options lose time value. Vega: Value of position will decrease as implied volatility increases. NB: Whilst the expiry prole is similar to that of the Short Strangle, the difference relates to premium outlay. With the Short Guts strategy you are selling two in-the-money options (with a Short Strangle both options are out-of-the-money). 26 17. Long Buttery 1 month to expiry 3 months to expiry expiry profit B price of underlying ATM A time decay C loss LIFFE CONNECT Strategy code: B. The trade: Buy put (or call) A, sell two puts (or calls) at higher strike B, buy put (or call) at an even higher strike C. Market expectation: Direction neutralvolatility bearish. In this case, the holder expects the underlying to remain around strike B, or it is felt that there will be a fall in implied volatility. Position is less risky than selling straddles or strangles as there is a limited downside exposure. Prot amp loss characteristics at expiry: Prot: Maximum prot limited to the difference in strikes between A and B minus the net cost of establishing the position. Maximised at mid strike B (assuming A-B and B-C are equal). Loss: Maximum loss limited to the net cost of the position for either a rise or a fall in the underlying. Break-even: Reached when the underlying is higher than A or lower than C by the cost of establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta 0 - gamma - -- - theta - - vega - -- - Delta: Neutral (assuming an at-the-money position). Delta becomes more positive as underlying moves to A, negative as the underlying moves to C. Gamma: Highest at or about strike B. Below strike A, or above strike C, the gamma will tend to decline. May become positive at greater distances from B. Theta: Time decay will be negligible until the nal month of the contract. Decay will benet the holder between underlying levels A and C, being greatest at B. If the underlying moves outside this area, decay will act against holder. Vega: Increased volatility will reduce the value of the position. Volatility may have a positive impact if the underlying is below A or above C by a sufcient margin. 27 18. Short Butterfly 1 month to expiry 3 months to expiry expiry profit C A ATM price of underlying loss B LIFFE CONNECT Strategy code: B. The trade: Sell put (or call) A, buy two puts (or calls) B, sell put (or call) C. Market expectation: Market neutralvolatility bullish. In this case the holder expects a directional move in the underlying, or a rise in implied volatility. Prot amp loss characteristics at expiry: Prot: Maximum prot is the net credit received in establishing the position and will occur if there is a sufcient directional move of the underlying, in either direction. Loss: Limited to the difference in strikes between A and B, minus the net credit in establishing the position. Break-even: Reached when the underlying is higher than A or lower than C by the credit received from establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta - 0 gamma theta - - - vega - - Delta: Neutral (assumed at-the-money spread). Delta becomes more positive as underlying moves to C, negative as the underlying moves to A. Gamma: Highest at or about strike B and will tend to decline as the market moves in either direction from this point. May become negative at greater distances from B. Theta: Time decay will be negligible until the nal month of the contract. Decay will act against the holder between underlying levels A and C, being greatest at B. If the underlying moves outside this area, decay will benet the holder. Vega: Increased volatility will increase the theoretical value of the position. Volatility may have a negative impact if the underlying is below A or above C by a sufcient margin. 28 19. Long Condor 1 month to expiry 3 months to expiry expiry profit B C price of underlying ATM A D loss LIFFE CONNECT Strategy code: W. The trade: Buy put (call) at A sell put (call) at two higher strikes B, C buy put (call) at yet higher strike D. Market expectation: Direction neutralvolatility bearish. A Long Condor allows for a greater degree of volatility and hence a wider band of prot potential than a Long Buttery. Prot and loss characteristics at expiry: Prot: Maximised where the underlying settles between the two strike prices B and C, but will decline as the market rises, or falls beyond these strikes. Loss: Occurs if the underlying rises towards strike D or falls towards strike A. Will be limited to the cost of establishing the position for either a rise or a fall in the underlying. Break-even: Lower break-even point reached when underlying reaches the lower strike price A plus the cost of establishing the spread, and the higher break-even when the underlying reaches the level of the higher strike D minus the cost of establishing the spread. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta 0 -- gamma - -- - theta - - vega - -- - Delta: Neutral (assumed at-the-money position). Delta becomes more positive as underlying moves to A, negative as the underlying moves to D. Gamma: Highest at or about strikes B and C. Below A, or above D, gamma will begin to decline. May become positive as the underlying moves further away from the ATM position. Theta: Time decay will be negligible until the nal month of the contract. Decay will benet the holder between underlying levels A and D, being greatest between B and C. If the underlying moves outside this area, decay will act against holder. Vega: Increased volatility will act against the holder. Volatility may have a positive impact if the underlying is below A or above D by a sufcient margin. 29 20. Short Condor 1 month to expiry 3 months to expiry expiry profit D A price of underlying ATM C loss B LIFFE CONNECT Strategy code: W. The trade: Sell put (call) at A buy put (call) at two higher strikes B, C sell put (call) at yet higher strike D. Market Expectation: Direction neutralvolatility bullish. Holder expects the market to move signicantly, or volatility to rise, but the direction is uncertain. A Short Condor will require a larger directional move than a buttery in order to yield a prot. Prot amp loss characteristics at expiry: Prot: Limited and will occur if the market moves above the highest strike (D) or below the lower strike at A. Loss: Maximum losses are limited and will occur if the market remains between the exercise prices B and C. Break-even: Lower break even reached when underlying reaches the lower strike price A plus the net credit received from establishing the position, and the higher breakeven when the underlying reaches the level of the higher strike price D minus the credit received from establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta -- 0 gamma theta - - - vega - - Delta: Neutral (assumed at-the-money spread). Delta becomes more positive as underlying moves to D, negative as the underlying moves to A. Gamma: Highest between strikes B and C and will tend to decline as the market moves in either direction from this point. May become negative as the underlying moves further away from the ATM position. Theta: Time decay will be negligible until the nal month of the contract. Decay will act against the holder between underlying levels B and C. If the underlying moves outside this area, decay will benet the holder. Vega: Increased volatility will increase the theoretical value of the position. Volatility may have a negative impact if the underlying is below A or above D by a sufcient margin. 30 21. Long Iron Butterfly 1 month to expiry 3 months to expiry expiry profit C A ATM price of underlying loss B LIFFE CONNECT Strategy code: I. The trade: Buy Straddle, sell Strangle with strike prices above and below the strike price of the Straddle, i. e. Sell a put (A), buy a put and a call at higher strike (B), sell a call at an even higher strike (C). Market expectation: Direction neutralvolatility bullish. Holder expects a market move in either direction. The position will also benet from an increase in volatility. Prot amp loss characteristics at expiry: Prot: Limited maximised where the underlying rises to strike C or falls to strike A. Loss: Limited to the net debit in establishing the position, greatest if underlying is at B. Break-even: Reached when underlying is above or below strike price B by the same amount as the initial debit. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta -- 0 gamma theta - - - vega - - Delta: Neutral (assumed at-the-money). Becomes highly positive (negative) for large decreases (increases) in the underlying. Gamma: Highest at or about strike B, and will tend to decline as the market moves in either direction from this point. May become negative at greater distances from B. Theta: Time decay will be negligible until the nal month of the contract. Decay will act against the holder between underlying levels A and C, being greatest at B. If the underlying moves outside this area, decay will benet the holder. Vega: Value of position will increase as expected volatility increases. 31 22. Short Iron Butterfly 1 month to expiry 3 months to expiry expiry B profit price of underlying C A loss LIFFE CONNECT Strategy code: I. The Trade: Sell Straddle, buy Strangle with strike prices above and below the strike price of the Straddle, i. e. Buy put (A), sell put and call at higher strike (B), buy call at equally higher strike (C). Market expectation: Direction neutralvolatility bearish. If the underlying is at, or about strike B and is expected to remain at this level, or it is felt that volatility will fall. Prot amp loss characteristics at expiry: Prot: Limited to the net credit in establishing the position. Maximised when the underlying is at B. Loss: Limited loss occurs if there is a directional move in the market. Maximised at the lower strike A, and the higher strike C. Break-even: Reached when underlying is above or below strike price B by the same amount as the net credit in establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta 0 -- gamma - -- - theta - - vega - -- - Delta: Neutral (assumed at-the-money position). Gamma: Gamma will be highest at market level B and lowest if the market falls below A or rises above market level C. May become positive at greater distances from B. Theta: The position will accrue time value most rapidly at B. If the market moves outside of the A-C band, time decay will move against the holder. 32 23. Long Iron Condor D A 1 month to expiry 3 months to expiry expiry profit ATM price of underlying C B loss LIFFE CONNECT Strategy code: 5. The Trade: Buy strangle, sell strangle with strike prices outside those of the bought strangle, i. e. sell a put (A), buy a put at higher strike (B), buy a call at even higher strike (C), sell a call at even higher strike (D). This trade is only valid for FTSE 100 Index option contracts. Market expectation: Direction neutralvolatility bullish. Holder expects the market to move signicantly, or volatility to rise, but the direction is uncertain. A Long Iron Condor will require a larger directional movement than an Iron Buttery in order to yield a prot. Prot amp loss characteristics at expiry: Prot: Limited and will occur if the market moves to or above the highest strike (D) or to or below the lowest strike (A). Loss: Maximum losses are limited and will occur if the market remains at or between the strikes B and C. Break-even: Lower break-even reached when underlying falls below strike price B by the amount of the premium paid. Upper break-even reached when underlying rises above strike price C by the amount of premium paid. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta -- 0 gamma theta - - - vega - - Delta: Neutral (assumed at-the-money position). Delta becomes more positive as underlying moves to D, negative as the underlying moves to A. Gamma: Highest between strikes B and C and will tend to decline as the market moves in either direction from this point. May become negative as the underlying moves further away from the ATM position. Theta: Time decay will be negligible until the nal month of the contract. Decay will act against the holder between B and C. If the underlying moves outside this area, decay will benet the holder. Vega: Increased volatility will increase the theoretical value of the position. Volatility may have a negative impact if the underlying is below A or above D by a sufcient margin. 33 24. Short Iron Condor 1 month to expiry 3 months to expiry expiry C profit B ATM price of underlying loss D A LIFFE CONNECT Strategy code: 5. The trade: Sell strangle, buy strangle with strike prices outside those of the sold strangle, i. e. buy a put (A), sell a put at higher strike (B), sell a call at even higher strike (C), buy a call a even higher strike (D). This trade is only valid for FTSE 100 Index option contracts. Market expectation: Direction neutralvolatility bearish. A Short Iron Condor allows for a greater degree of volatility and hence a wider band of prot potential than a Short Iron Buttery. Prot amp loss characteristics at expiry: Prot: Maximised where the underlying remains at or within the exercise prices B and C, but will decline as the market rises or falls beyond these strikes. Will be limited to the net premium received for the trade. Loss: Losses are limited, and will occur if the underlying rises to or above strike D or falls to or below strike A. Break-even: Lower break-even reached when underlying falls below strike price B by the amount of the premium received. Upper break-even reached when underlying rises above strike price C by the amount of premium received. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta 0 -- gamma - -- - theta - - vega - -- - Delta: Neutral (assumed at-the-money position). Delta becomes more positive as underlying moves to A, negative as the underlying moves to D. Gamma: Highest between strikes B and C and will tend to decline as the market moves in either direction from this point. May become positive as the underlying moves further away from the ATM position. Theta: Time decay will be negligible until the nal month of the contract. Decay will benet the holder between B and C. If the underlying moves outside this area, decay will act against the holder. Vega: Increased volatility will act against the holder. Volatility may have a positive impact if the underlying is below A or above D by a sufcient margin. 34 25. Long Call Strip 1 month to expiry 3 months to expiry expiry B profit price of underlying D C loss B A LIFFE CONNECT Strategy code: M. The trade: Buy call at strike A, buy calls at higher strike prices. Between 3 and 8 strikes may be used in total, with one call option purchased at each. In the graph above, a 4-option strip is shown. All call options must be for the same expiry month. This strategy is not available for individual equity options or commodity options. Market expectation: Direction bullishvolatility bullish. A long call strip gives the holder an increased exposure to a positive movement in the underlying price. Prot amp loss characteristics at expiry: Prot: Unlimited in a rising market. Loss: Limited to the initial premium. Break-even: There will be a single break-even position, but the position in relation to the strikes will depend on the strike prices involved and the premium paid. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta gamma theta -- --- -- vega Delta: Increases as the underlying rises. The maximum level of delta depends on the number of calls in the strip, e. g. with 4 calls, the combined delta will tend to 4 as the underlying increases. Gamma: Highest between the highest and lowest strike prices. High gamma will be focussed on the area around each strike price as the strategy approaches expiry. Theta: Time decay will act against the holder of a long call strip. Vega: The value of the position will increase as expected volatility increases. 35 26. Short Call Strip 1 month to expiry 3 months to expiry expiry B A B profit C D price of underlying loss LIFFE CONNECT Strategy code: M. The trade: Sell call at strike A, sell calls at higher strike prices. Between 3 and 8 strikes may be used in total, with one call option sold at each. In the graph above, a 4-option strip is shown. All call options must be for the same expiry month. This strategy is not available for individual equity options or commodity options. Market expectation: Direction neutral or bearishvolatility bearish. Prot amp loss characteristics at expiry: Prot: Limited to the initial premium received. Loss: Unlimited in a rising market. Break-even: There will be a single break-even position, but the position in relation to the strikes will depend on the strike prices involved and the premium paid. Market sensitivities at 30 days to expiry: underlying down at-the-money delta - -- up --- gamma -- --- -- theta vega -- --- -- Delta: Decreases as the underlying rises. The minimum level of delta depends on the number of calls in the strip, i. e. with 4 calls, the combined delta will tend to -4 as the underlying increases. Gamma: Highest between the highest and lowest strike prices. High gamma will be focussed on the area around each strike price as the strategy approaches expiry. Theta: Time decay will benet the holder of a short call strip. Vega: The value of the position will decrease as expected volatility increases. 36 27. Long Put Strip 1 month to expiry 3 months to expiry expiry B profit price of underlying D C B loss A LIFFE CONNECT Strategy code: M. The trade: Buy put at strike A, buy puts at lower strike prices. Between 3 and 8 strikes may be used in total, with one put option purchased at each. In the graph above, a 4-option strip is shown. All put options must be for the same expiry month. This strategy is not available for individual equity options or commodity options. Market expectation: Direction bearishvolatility bullish. A long put strip gives the holder an increased exposure to a decline in the underlying price. Prot amp loss characteristics at expiry: Prot: Unlimited in a falling market. Loss: Limited to the initial premium. Break-even: There will be a single break-even position, but the position in relation to the strikes will depend on the strike prices involved and the premium paid. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta --- -- - gamma theta -- --- -- vega Delta: Decreases as the underlying rises. The maximum level of delta depends on the number of puts in the strip - e. g. with 4 puts, the delta will tend to -4 as the underlying decreases. Gamma: Highest between the highest and lowest strike prices. High gamma will be focussed on the area around each strike price as the strategy approaches expiry. Theta: Time decay will act against the holder of a long put strip. Vega: The value of the position will increase as expected volatility increases. 37 28. Short Put Strip 1 month to expiry 3 months to expiry expiry B A profit B C price of underlying D loss LIFFE CONNECT Strategy code: M. The trade: Sell put at strike A, sell puts at lower strike prices. Between 3 and 8 strikes may be used in total, with one put option sold at each. In the graph above, a 4-option strip is shown. All put options must be for the same expiry month. This strategy is not available for individual equity options or commodity options. Market expectation: Direction neutral or bullishvolatility bearish. Prot amp loss characteristics at expiry: Prot: Limited to the initial premium received. Loss: Unlimited in a falling market. Break-even: There will be a single break-even position, but the position in relation to the strikes will depend on the strike prices involved and the premium paid. Market sensitivities at 30 days to expiry: underlying down at-the-money delta up gamma -- --- -- theta vega -- --- -- Delta: Increases as the underlying rises. The minimum level of delta depends on the number of puts in the strip, e. g. with 4 puts, the combined delta will tend to 4 as the underlying decreases. Gamma: Highest between the highest and lowest strike prices. High gamma will be focussed on the area around each strike price as the strategy approaches expiry. Theta: Time decay will benefit the holder of a short put strip. Vega: The value of the position will decrease as expected volatility increases. 38 29. Long Calendar Spread This is a time value trade (involving the sale and purchase of options with different expiry months) and as such cannot be adequately plotted in terms of its riskreward prole. LIFFE CONNECT Strategy code: E. The trade: Sell near put (call), buy far put (call) at same strike. Market expectation: Direction neutralvolatility bullish. The near term option decays faster than the longer dated option, therefore the trade benets from an increase in volatility. Prot and loss characteristics at expiry (of near term option): The potential prot in a time value trade is derived from the time decay characteristics of options (see the description of Theta in the introduction). The near, written put (call) will decay at a rate faster than that of the far, purchased put (call) as it approaches expiry and it is this differential in the rate of time decay which may yield a prot. Assuming the options are at-the-money and the market remains at this level, the sold option will expire worthless and the purchased option, although not possessing intrinsic value, will hold time value. As the initial position is established at a loss (because the far option will command a higher premium), to yield a prot, the time value of the long option after the expiry of the short dated option must be such that its value is greater than the initial cost of establishing the position. 39 30. Long Diagonal Calendar Spread This is a time value trade (involving the sale and purchase of options with different expiry months) and as such cannot be adequately plotted in terms of its riskreward prole. LIFFE CONNECT Strategy code: F. The trade: Sell near put (call), buy far put (call) at a different strike. Market expectation: Expected to prot from time-decay differential and an increase in volatility. In addition, the position is suitable for a directional view on the underlying, e. g. sell Sep 99.00 call and buy Dec 101.00 call, giving a reduced cost calendar spread trade. Prot amp loss characteristics at expiry (of near option): The protability of the trade depends upon the differing time decay characteristics of the near, sold put (call) and the far, purchased put (call). The difference between this trade and that of a Calendar spread is that a diagonal spread involves options with different strike prices. As with a Calendar spread, the maximum loss will occur if the near, sold call (put) moves in-the-money and is exercised, followed by a fall (rise) in the market rendering the purchased call (put) worthless on expiry. 40 31. Long Straddle Calendar Spread This is a time value trade (involving the simultaneous sale and purchase of straddles with different expiry months but same strikes), and as such cannot be adequately plotted in terms of its riskreward prole. LIFFE CONNECT Strategy code: N. The Trade: Sell Straddle in near month, buy Straddle in far month at same strike. Market expectation: The near Straddle decays faster than the longer dated Straddle. The trade benets from an increase in volatility. Prot amp loss characteristics at expiry (of near straddle): The potential prot in this trade arises as a result of the differing rates of time decay between the two straddles. Maximum prot will be realised if the sold straddle expires worthless and after this expiry, increased volatility or a directional move increases the value of the purchased straddle. Maximum loss will occur if the sold straddle is exercised and reduced volatility subsequently occurs, driving the purchased straddle into loss. 41 32. Long Diagonal Straddle Calendar Spread This is a time value trade (involving the sale and purchase of straddles with different expiry months), but with different strikes and as such cannot be adequately plotted in terms of its riskreward prole. LIFFE CONNECT Strategy code: P. The Trade: Sell Straddle in near month, buy Straddle in far month at different strike. Market expectation: Prot from time decay differential, benet from an increase in volatility, andor benet from a directional movement in the underlying (as the position involves straddles of different strikes, it is suitable for a directional view). Prot amp loss characteristics at expiry (of near straddle): The potential prot in this trade arises as a result of the differing rates of time decay between the two straddles. Maximum prot will be realised if the sold straddle expires worthless, and after this expiry, increased volatility drives the purchased straddle in-themoney. Alternatively, the purchased straddle can be sold for its time value before the expiry date. Maximum loss will occur if the sold call is exercised and the market subsequently moves unfavourably, driving the purchased position out-of-the-money such that it expires worthless or can be sold for its time value only. 42 33. Long Jelly Roll This is a time value trade (involving the sale and purchase of options with different expiry months) and as such cannot be adequately plotted in terms of its riskreward prole. LIFFE CONNECT Strategy code: A. The trade: Buy put, sell call at same strike price in near expiry month, sell put, buy call at same strike in far expiry month (the strike price in the far expiry need not be equal to the strike price in the near expiry). This trade is only valid for FTSE 100 Index option contracts. Market expectation: Direction neutralvolatility neutral. This trade consists of a short synthetic underlying in the near month and a long synthetic underlying in the far month. The holder will benet if the differential between the futures prices of the two expiries (or the cost of carry differential in the case of premium up front options) widens. Prot amp loss characteristics at expiry (of near synthetic): The potential prot of this trade is restricted as it arises from a widening of the futures price differential of the expiry months in question. After the expiry of the near term options, the holder is left with a long synthetic underlying position. The holder will therefore benet from a rising market after the rst expiry, and will be adversely affected by a falling market after the rst expiry. 43 34. Long Straddle Strip This is a time value trade (involving the purchase of options with different expiry months) and as such cannot be adequately plotted in terms of its risk reward prole. LIFFE CONNECT Strategy code: M. The trade: Buy between two and four straddles. Each straddle must be in a separate expiry month. This strategy is not available for individual equity options or commodity options. Market expectation: A long straddle strip gives the holder an increased exposure to an increase in volatility. Prot amp loss characteristics at expiry (of near straddle): The potential prot from this trade arises from either a signicant directional movement in the underlying, or an increase in the expected volatility of the underlying across the range of expiry months. Loss will occur if the value of the underlying remains stable andor the expected future volatility of the underlying falls. 44 35. Long Box profit price of underlying loss LIFFE CONNECT Strategy code: X. The trade: Buy a call and sell a put, buy a put and sell a call and at a higher strike. All four options should have the same expiry date. Market expectation: Direction neutralvolatility neutral. This is a locked trade, and hence its value is wholly independent of the price of the underlying. Where the synthetic long underlying price at one strike is trading at a lower price than the synthetic short underlying at the higher strike, such that the differential may be exploited. Prot and loss characteristics at expiry: If the pricing differential can be exploited, a prot will occur, the extent of the mis-pricing translating into the level of prot realised. The Box is regularly used by traders to close out positions near expiry. Generally traded at par (zero) for options on futures, and at the net cost of carry for index and equity options. Can be problematic if all positions are not closed out at exactly the same time. Market sensitivities at 30 days to expiry: As this is a form of arbitrage and prot is therefore independent of changes in the underlying, the value of the position will be independent of the market, hence: underlying down at-the-money up delta 0 0 0 gamma 0 0 0 theta 0 0 0 vega 0 0 0 Delta: Neutral Gamma: Neutral Theta: Neutral Vega: Neutral putcall parity ensures that implied volatility will be exactly the same for both a call and a put with the same strike and expiry. NB: A Box is simply a conversion at one exercise price and a reversal at a different exercise price. 45 36. Long Two by One Ratio Call Spread 1 month to expiry 3 months to expiry expiry profit A price of underlying loss B LIFFE CONNECT Strategy code: H. The trade: Sell a call (A), buy 2 calls at higher strike (B). Market expectation: Market bullishvolatility bullish. Holder expects the market to settle above B. The position is usually established by selling an at-the-money or close to at-the-money call (A), and buying two out-of-the-money calls (B), such that it can be established at a small net credit. Depending on the strikes chosen, the position could also be established at break-even or at a small premium cost. Prot amp loss characteristics at expiry: Prot: Unlimited if underlying rallies. At A or below, prot limited to net credit. Loss: Greatest loss occurs at higher strike B, and is the difference between strikes B-A, minus (plus) net credit (debit). Break-even: Lower break-even point is reached when the underlying exceeds the lower strike option A by the same amount as the net credit received (if initial position established at a net cost, there is no lower break-even point). Higher break-even point reached when intrinsic value of option A, is equal to the combined intrinsic value of the two higher strike options B, plus (minus) the net credit (debit). Market sensitivities at 30 days to expiry: Delta: Increases towards 1 as underlying rises. If, approaching expiry, the underlying is around strike A, the delta may become negative. Gamma: Highest at B and declines as the underlying rises above B. If, approaching expiry, the underlying is around strike A, the gamma may become negative. Theta: Value of position will decrease as the bought options are affected by time decay. However, if the underlying remains below, or around strike A, the theta may become positive. Vega: Value of position will increase as implied volatility increases. However, If approaching expiry, the underlying is around strike A, the vega may become negative. 46 37. Short Two by One Ratio Call Spread 1 month to expiry 3 months to expiry expiry B profit price of underlying A loss LIFFE CONNECT Strategy code: H. The trade: Buy a call (A), sell 2 calls at higher strike (B). Market expectation: Market neutralvolatility bearish. Holder expects that the market will not rally but will settle around point B. Position usually established by buying an at or close to-the-money call, and selling two out-of-the-money calls such that although it is a net short position, it may be established at a small cost (as in the above example). Depending on the strikes chosen, the position could also be established at break-even or at a small credit. Prot amp loss characteristics at expiry: Prot: Greatest prot occurs at higher strike B which is the difference between strikes B-A plus (minus) net credit (debit). Loss: Unlimited if underlying rallies. At A or below, loss limited to net cost. Break-even: Lower break-even reached when the underlying exceeds the lower strike option A, by the same amount as the net cost of the position (if initial position established at a net credit, there is no lower break-even point). Higher break-even point reached when intrinsic value of option A, plus (minus) the net credit (debit) from establishing the position, is equal to the combined intrinsic value of the two higher strike options B. Market sensitivities at 30 days to expiry: Delta: Approaches -1 as the underlying rises. If, approaching expiry, the underlying is around strike A, the delta may become positive. Gamma: Highest at point B and declines as the underlying rises above B. If, approaching expiry, underlying is around strike A, it may become positive. Theta: Value of position will increase as the short options are affected by time decay. If the underlying remains below, or around strike A, the theta may become positive. Vega: Value of position will decrease as implied volatility increases. If, approaching expiry, the underlying is around strike A and the vega may become positive. 47 38. Long Two by One Ratio Put Spread 1 month to expiry 3 months to expiry expiry profit B price of underlying loss A LIFFE CONNECT Strategy code: H. The trade: Sell a put (B), buy two puts at lower strike (A). Market expectation: Market bearishvolatility bullish. Holder expects market to fall below A. Position usually established by selling an at or close to the money put (B), and buying two out-of-the-money puts (A), such that although it is a net long position, it can be established at a small credit as in the above example. Depending on the strikes chosen, the position could also be established at break-even or at a small premium cost. Profit amp loss characteristics at expiry: Profit: Unlimited in a falling market. At B or above, profit limited to net credit. Loss: Greatest loss which occurs at lower strike A, is the difference between strikes B-A minus (plus) net credit (debit) Break-even: Lower break-even reached when the combined intrinsic value of the two purchased puts at A, plus (minus) the initial credit (debit) from establishing the position, are equal to the value of the written put B. Higher break-even point reached when intrinsic value of option B is equal to initial credit. If initial position established at a net cost, there is no higher break-even point. Market sensitivities at 30 days to expiry: Delta: Approaches -1 as underlying falls. If approaching expiry, the underlying is around strike A and the delta may become positive. Gamma: Highest at A and declines as the underlying falls below this point. If approaching expiry, the underlying is at B, the gamma may become negative. Theta: Value of position will decrease as the long options are affected by time decay. If the underlying remains above, or around strike B, the theta may become positive. Vega: Value of position will increase as implied volatility increases. If, approaching expiry, the underlying is around strike B and the vega may become negative. 48 39. Short Two by One Ratio Put Spread 1 month to expiry 3 months to expiry expiry A profit price of underlying B loss LIFFE CONNECT Strategy code: H. The trade: Buy a put (B), sell two puts at lower strike (A). Market expectation: Market neutralvolatility bearish. Holder expects market to settle around strike A, and feels that the market will not fall below A. Usually established by buying an at - the-money or close-to at-the-money put (B) and selling two out-of-the-money puts (A) such that it is established at a small cost. Depending on the strikes chosen, the position could also be established at break-even or at a small premium credit. Prot amp loss characteristics at expiry: Prot: Greatest at A, it is the difference between strikes A-B plus (minus) net credit (debit). Loss: Unlimited in a falling market. At B or above, loss limited to net cost. Break-even: Lower break-even point is reached when the combined intrinsic value of the options at A equals the intrinsic value of option B, plus (minus) the net credit (debit) from establishing the position. Higher break-even point reached when intrinsic value of option B, is equal to the debit from establishing the position. Market sensitivities at 30 days to expiry: Delta: Increases towards 1 as market falls. If however, approaching expiry, the underlying is around strike A and the delta may become negative. Gamma: Highest at point A and declines as underlying falls below A. If approaching expiry, the underlying is at B and the gamma may become positive. Theta: Value of position will increase as short options are affected by time decay. If however, the underlying remains above or around strike B, the theta may become negative. Vega: Value of position will decrease as implied volatility increases. If, however, approaching expiry, the underlying is at B and the vega may become positive. 49 40. Long Call Ladder 1 month to expiry 3 months to expiry expiry B profit C A price of underlying loss LIFFE CONNECT Strategy code: L. The trade: Buy a call (A), sell call at higher strike (B), sell call at an even higher strike (C). Market expectation: Direction bearishvolatility bearish. In this case the holder expects the market to settle between B and C but feels that volatility will not rise. Prot amp loss characteristics at expiry: Prot: Limited to the difference between strikes A and B plus (minus) net credit (debit). Greatest prot occurs between strikes B and C. Loss: Unlimited if underlying rallies. At A or below, loss limited to net cost. Break-even: Lower break-even reached when the underlying exceeds the lower strike option A, by the same amount as the net cost of the position. Higher break-even point reached when the intrinsic value of option A, plus (minus) the net credit (debit) from establishing the position, is equal to the intrinsic value of the two higher strike options at B and C. Market sensitivities at 30 days to expiry: Delta: Approaches -1 as underlying rises. If, approaching expiry, the underlying is around strike A, the delta becomes positive. Gamma: Usually negative. Highest between B and C. If, approaching expiry, the underlying is around strike A and the gamma becomes positive. Theta: Value of position will increase as the short options are affected by time decay. If the underlying remains below or around strike A, theta becomes slightly negative. Vega: Value of position will decrease as implied volatility increases. If, approaching expiry, the underlying is around strike A and the vega may become positive. 50 41. Short Call Ladder 1 month to expiry 3 months to expiry expiry profit C price of underlying loss A B LIFFE CONNECT Strategy code: L. The trade: Sell a call (A), buy call at higher strike (B), buy call at an even higher strike (C). Market expectation: Direction bullishvolatility bullish. Holder expects a substantial rise in the underlying market. Prot amp loss characteristics at expiry: Prot: Unlimited if underlying rallies. At A or below, prot limited to net credit. Loss: Limited to the difference between strikes A and B minus (plus) net credit (cost). Break-even: Lower break-even reached when the underlying exceeds the lower strike option A by the same amount as the net credit received, (if initial position established at a net cost, there is no lower break-even point). Higher break-even point reached when intrinsic value of option A, is equal to the intrinsic value of the two higher strike options at B and C, plus (minus) the net credit (debit) in establishing the position. Market sensitivities at 30 days to expiry: Delta: Increases towards 1 as underlying rises. If, approaching expiry, the underlying is around strike A, the delta becomes negative. Gamma: Highest between strikes B and C. If, approaching expiry, the underlying is around strike A, the gamma becomes negative. Theta: Value of position will decrease as the long options decay. If the underlying remains below, or around strike A, theta becomes slightly positive. Vega: Value of position will increase as implied volatility increases. If, approaching expiry, the underlying is around strike A, the vega may become slightly negative. 51 42. Long Put Ladder 1 month to expiry 3 months to expiry expiry profit A B price of underlying C loss LIFFE CONNECT Strategy code: L. The trade: Sell put (A), sell put at higher strike (B), buy put at an even higher strike (C). Market expectation: Direction bullishvolatility bearish. Holder expects underlying to (continue to) be between strikes A and B and rmly believes that the market will not fall. Prot amp loss characteristics at expiry: Prot: Limited to the difference B-C, plus (minus) net credit (debit). Maximised between strikes A and B. Loss: Unlimited if underlying falls. At C or above, loss limited to net cost of position. Break-even: Lower break-even reached when the intrinsic value of the purchased put C plus (minus) net credit (cost) is equal to the intrinsic value of the sold options A and B. Higher break-even reached when underlying falls below strike C by the same as the net cost of the position. Market sensitivities at 30 days to expiry: Delta: Positive. However, becomes negative if the underlying is around strike C approaching expiry. Gamma: Highest between A and B. If however, approaching expiry, the underlying is at C, the gamma becomes positive. Theta: Positive value of position will increase as short options decay. If however, approaching expiry, the underlying is above or around C, theta may become slightly negative. Vega: Negative value of position will decrease as implied volatility increases. If however, approaching expiry, the underlying is at C, the vega may become slightly positive. 52 43. Short Put Ladder 1 month to expiry 3 months to expiry expiry profit C price of underlying loss A B LIFFE CONNECT Strategy code: L. The trade: Buy put (A), buy put at higher strike (B), sell put at equally higher strike (C). Market expectation: Direction bearishvolatility bullish. Buyer expects a volatile market and additional prots can be made in a bearish market. Prot amp loss characteristics at expiry: Prot: Unlimited if underlying falls. At C or above, prot limited to the net credit. Loss: Limited to the difference between B and C minus (plus) net credit (debit). Break-even: Higher break-even reached when the market falls below C by the value of the net credit. Lower break-even reached when the intrinsic value of options A and B plus (minus) the net credit (debit) is equal to the intrinsic value of C. Market sensitivities at 30 days to expiry: Delta: Approaches -1 as underlying falls. If however, approaching expiry, the underlying is around strike B or C, the delta may become positive. Gamma: Maximum between points A and B. However if approaching expiry, the underlying is at C, the gamma may become negative. Theta: Value of position will decrease as long options are affected by time decay. If however, the underlying is above, or about C, the theta may become positive. Vega: Value of position will increase as implied volatility increases. If however, approaching expiry, the underlying is around C, the vega may become negative. 53 44. Synthetic Long Underlying expiry profit price of underlying loss LIFFE CONNECT Strategy code: r. The Trade: Buy call, sell put at same strike (generally the at-the-money strike). This strategy is effectively a Reversal without the sale of the underlying. Market Expectation: Market bullishvolatility neutral. Profit and loss characteristics at expiry: Prot: Unlimited in a rising market. Loss: Unlimited in a falling market. Break-even: If the position is opened at a net debit, break-even is reached when the underlying rises above the strike price of the strategy by the net amount of premium paid. If the position is created at a net credit, break-even occurs when the underlying falls below the strike price by the net premium received. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta Gamma 0 0 0 Theta 0 0 0 Vega 0 0 0 Delta: 1 since the strategy synthetically replicates a long underlying. Gamma: Zero. Delta of position is not subject to change. Theta: Zero. Positive theta of short put nets out against negative theta of long call. Vega: Zero. Positive vega of long call nets out against negative vega of short put. 54 45. Synthetic Short Underlying expiry profit price of underlying loss LIFFE CONNECT Strategy code: r. The Trade: Buy put, sell call at the same strike (generally the at-the-money strike). This strategy is effectively a Conversion without the purchase of the underlying. Market Expectation: Market bearishvolatility neutral. Prot and loss characteristics at expiry: Prot: Unlimited in a falling market Loss: Unlimited in a rising market Break-even: If the position is opened at a net debit, break-even is reached when the underlying falls below the strike price of the strategy by the net amount of premium paid. If the position is created at a net credit, break-even occurs when the underlying rises above the strike price by the net premium received. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta --- --- --- Gamma 0 0 0 Theta 0 0 0 Vega 0 0 0 Delta: 1 since the strategy synthetically replicates a short underlying. Gamma: Zero. Delta of position is not subject to change. Theta: Zero. Positive theta of short call nets out against negative theta of long put. Vega: Zero. Positive vega of long put nets out against negative vega of short call. 55 46. Long Call Spread versus Put 1 month to expiry 3 months to expiry expiry C profit price of underlying A B loss LIFFE CONNECT Strategy code: x. The Trade: Buy call (B), sell call at higher strike (C), sell put at any strike the short put will generally be at a strike lower than both calls (A). This spread has a similar prole to the long call spread, but the short put reduces the cost of the strategy due to the intake of premium. Market Expectation: Market bullishvolatility bearish. Prot and loss characteristics at expiry: Prot: Limited in a rising market. Loss: Unlimited in falling market. Break-even: If the position is opened at a net debit, break-even occurs when the underlying rises above strike B by the net amount of premium paid. If the position is created at a net credit, break-even is reached when the underlying falls below strike A by the same amount as the premium received. Market sensitivities at 30 days to expiry: Underlying down at-the-money Delta Gamma - -- - Theta Vega - -- - up Delta: Positive. Moves towards 1 as future nears strike A. Become less positive as underlying rises. Gamma: Negative. Highest when underlying is around strike B. Positive at B near expiry. Theta: Positive at A and C. Negative at B near expiry. Vega: Negative at A and C. Positive at B near expiry. 56 47. Short Call Spread versus Put 1 month to expiry 3 months to expiry expiry profit B A price of underlying loss C LIFFE CONNECT Strategy code: x. The Trade: Sell call (B), buy call at higher strike (C), buy put at any strike the long put will generally be at a strike lower than both calls (A). This spread has a similar prole to the short call spread, but the long put provides unlimited prot potential in a falling market. Market Expectation: Market bearishvolatility bullish. Prot and loss characteristics at expiry: Prot: Unlimited in a falling market Loss: Limited in a rising market Break-even: If the position is created at a net debit, break-even is reached when the underlying falls below strike A by the net amount of premium paid. If the position is opened at a net credit, break-even occurs when the underlying rises above strike B by the net premium received. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta --- -- - Gamma Theta - -- - Vega Delta: Negative. Moves towards 1 as future nears strike A. Become less negative as underlying rises. Gamma: Positive. Highest when underlying is around strike B. Negative at B near expiry. Theta: Negative at A and C. Positive at B near expiry. Vega: Positive at A and C. Negative at B near expiry. 57 48. Long Put Spread versus Call 1 month to expiry 3 months to expiry expiry profit A price of underlying C B loss LIFFE CONNECT Strategy code: y. The Trade: Buy put (B), sell put at lower strike (A), sell call at any strike the short call will generally be at a higher strike than both puts (C). The prole is similar to that of a long put spread, but with greater intake of premium due to the short call. Market Expectation: Market bearishvolatility bearish. Prot and loss characteristics at expiry: Prot: Limited in a falling market. Loss: Unlimited in a rising market. Break-even: If the position is created at a net debit, break-even is reached when the underlying falls below strike B by the net amount of premium paid. If the position is opened at a net credit, break-even occurs when the underlying rises above strike C by the premium received. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta - -- --- Gamma - -- - Theta Vega - -- - Delta: Negative. Moves towards 1 as underlying rises towards strike C. Gamma: Negative. Highest when underlying is around strike B. Positive at B near expiry. Theta: Positive at A and C. Negative at B near expiry. Vega: Negative at A and C. Positive at B near expiry. 58 49. Short Put Spread versus Call 1 month to expiry 3 months to expiry expiry profit B C loss price of underlying A LIFFE CONNECT Strategy code: y. The Trade: Sell put (B), buy put at lower strike (A), buy call at any strike the long call will generally be at a higher strike than both puts (C). The prole is similar to that of a short put spread, but the long call provides unlimited prot potential should the underlying rise above C. Market Expectation: Market bullishvolatility bullish. Prot and loss characteristics at expiry: Prot: Unlimited in a rising market. Loss: Limited in a falling market. Break-even: If the position is opened at a net credit, break-even occurs when the underlying falls below strike B by the premium received. If the position is opened at a net debit, breakeven is reached when the underlying rises above strike C by the amount of premium paid. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta Gamma Theta - -- - Vega Delta: Positive. Moves towards 1 as underlying rises towards strike C. Gamma: Positive. Highest when underlying is around strike B. Negative at B near expiry. Theta: Negative at A and C. Positive at B near expiry. Vega: Positive at A and C. Negative at B near expiry. 59 50. Long Straddle versus Call 1 month to expiry 3 months to expiry expiry profit B price of underlying loss A LIFFE CONNECT Strategy code: z. The Trade: Buy call (A), buy put at same strike, sell call at any strike (B) the short call will generally be at a strike higher than the straddle. This spread provides similar exposure to the long straddle, but with cheaper initial outlay due to the premium received from the short call. Market Expectation: Market neutral to bearishvolatility bullish. Prot and loss characteristics at expiry: Prot: Unlimited in falling market. Limited in rising market. Loss: Limited in a static market. Break-even: Reached when underlying moves in either direction from A by the net amount of premium paid. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta --- - Gamma - Theta - -- - Vega - Delta: Negative. Moves towards 1 as underlying falls below strike of straddle. Gamma: Positive. Change in delta will have greatest effect around strike A. Theta: Time decay will have a negative effect on the value of the position. As the underlying rises, this effect becomes negligible. Vega: Positive. An increase in expected volatility will have a positive effect on the spread. This effect lessens as the underlying moves away from the strike of the straddle, particularly as it rises. 60 51. Short Straddle versus Call profit 1 month to expiry 3 months to expiry expiry A price of underlying B loss LIFFE CONNECT Strategy code: z. The Trade: Sell call (A), sell put at same strike (A), buy call at any strike (B) the long call will generally be at a higher strike than the straddle. The prole is similar to that of a short straddle, but loss in a rising market is limited by the long call. Market Expectation: Market neutralvolatility bearish. Prot and loss characteristics at expiry: Prot: Limited in a static market. Loss: Limited in a rising market. Unlimited in a falling market. Break-even: Reached when underlying moves in either direction from A by the amount of premium received. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta - Gamma - -- - Theta - Vega - -- - Delta: Positive. Moves towards 1 as underlying falls below strike of straddle. Gamma: Negative. Change in delta will have greatest effect around strike A. Theta: Time decay will have a positive effect on the value of the position. As the underlying rises, this effect becomes negligible. Vega: Negative. A decrease in expected volatility will have a positive effect on the spread. This effect lessens as the underlying moves away from the strike of the straddle, particularly as it rises. 61 52. Long Straddle versus Put 1 month to expiry 3 months to expiry expiry profit A price of underlying loss B LIFFE CONNECT Strategy code: z. The Trade: Buy call (B), buy put at same strike (B), sell put at any strike (A) generally the short put will be at a strike lower than the straddle. This spread offers similar exposure to the long straddle, but at a cheaper cost because of the premium taken in from the short put. Market Expectation: Market neutral to bullishvolatility bullish. Prot and loss characteristics at expiry: Prot: Unlimited in a rising market. Limited in a falling market. Loss: Limited in a static market. Break-even: Reached when the underlying moves in either direction from B by the amount of premium paid. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta - Gamma - Theta - -- - Vega - Delta: Positive. Moves towards 1 as the underlying rises above the strike of the straddle. Gamma: Positive. Change in delta will have the greatest effect around strike B. Theta: Negative. Time decay will decrease the value of the spread, but as the underlying moves away from the strike of the straddle the effect of time decay lessens. In particular, as the underlying falls, the effect of time decay becomes negligible. Vega: Positive. Vega will be highest when the underlying is trading close to the strike of the straddle. 62 53. Short Straddle versus Put 1 month to expiry 3 months to expiry expiry B profit price of underlying A loss LIFFE CONNECT Strategy code: z. The Trade: Sell call (B), sell put at same strike, buy put at any strike (A) generally the long put will be at a strike lower than the straddle (A). This spread offers similar exposure to the short straddle, but the long put limits risk in a falling market. Market Expectation: Market neutralvolatility bearish. Prot and loss characteristics at expiry: Prot: Limited in a static market. Loss: Limited in a falling market. Unlimited in a rising market. Break-even: Reached when the underlying moves in either direction from B by the amount of premium received. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta - --- Gamma - -- - Theta - Vega - -- - Delta: Negative. Moves towards 1 as underlying rises above the strike of the straddle. Gamma: Negative. Change in delta will have the greatest effect around strike B. Theta: Positive. Time decay will increase the value of the spread, but as the underlying moves away from the strike of the straddle, the effect of time decay lessens. In particular, as the underlying falls, the effect of time decay becomes negligible. Vega: Negative. Vega will be highest when the underlying is trading close to the strike of the straddle. 63 54. Long Volatility Trade profit Volatility increase Volatility decrease Underlying price loss LIFFE CONNECT Strategy code: V. The trade: Buy puts and buy underlying or buy calls and sell underlying to give zero net delta. The position is dynamic in that as the underlying moves and the delta changes, additional futures must be bought or sold to maintain delta neutrality. For stock contingent trades, the underlying leg will comprise the underlying shares rather than the futures contract. Market expectation: Market neutralvolatility bullish. This position is a pure trade on volatility such that an increase in implied volatility will benet the holder. Prot amp loss characteristics at expiry: Prot: Dependent on an increase in implied volatility as well as any prots from the future hedge and hedge rebalancing. Loss: Limited to the costs of establishing the position plus any loss in rebalancing the hedge. Break-even: (i) For a long put, long futures position, if the price of the underlying increases, break-even is obtained where the gain in the value of the futures position (less the initial premium and less the rebalancing cost) is equal to zero. If price falls, break-even is obtained where the loss on the futures position (less the intrinsic value of the put, plusminus the rebalancing cost) is equal to zero. (ii) For a long call, short futures position, if the underlying price increases, break-even is obtained where the gain in the call (less the loss in the future, plusminus the rebalancing cost) is equal to zero. If price falls, break-even is obtained where the gain on the futures (minus the loss on the call, plusminus the re-balancing cost) is equal to zero. Delta: Neutral. Gamma: Positive, the delta neutral position is highly sensitive to movement in the underlying, consequently the position requires dynamic hedging. Theta: Value of position will decrease as options decay. Vega: Value of position will increase as expected volatility increases. 64 55. Short Volatility Trade profit Volatility decrease Volatility increase Underlying price loss LIFFE CONNECT Strategy code: V. The trade: Sell puts and sell underlying or sell calls and buy underlying to give zero net delta. The position is dynamic in that as the underlying moves and the delta changes, additional futures must be bought or sold to maintain delta neutrality. For stock contingent trades, the underlying leg will comprise the underlying shares rather than the futures contract. Market expectation: Market neutralvolatility bearish. The position is a trade on volatility such that a decrease in implied volatility will benet the holder. Prot amp loss characteristics at expiry: Prot: Limited to the credit received from the sold options and any prot on rebalancing the hedge. Loss: The more implied volatility rises, the greater will be the potential losses. Break-even. (i) For a short put, short futures position, if the underlying price increases, break-even is obtained where the initial premium on the put, minus the loss on the futures, plusminus the rebalancing cost, is equal to zero. If price falls, the gain on the futures position, minus the loss on the put, plusminus the rebalancing cost is equal to zero. (ii) For a short call, long futures position, if the underlying price rises, break-even is obtained where the gain on the futures, minus the loss on the call, plusminus the rebalancing cost, is equal to zero. If price falls, break-even is obtained where the call premium, minus the loss on the futures, plusminus the rebalancing cost, is equal to zero. Delta: Neutral. Gamma: Negative, the delta neutral position is highly sensitive to movements in the underlying, consequently the position requires dynamic hedging. Theta: Value of position will increase as the options decay. Vega: Value of position will decrease as expected volatility increases. 65 56. ConversionReversal profit price of underlying loss LIFFE CONNECT Strategy code: R. The trade: Conversion: Sell call, buy put at same strike, buy underlying. Reversal: Buy call, sell put at same strike, sell underlying. Market expectation: Direction neutralvolatility neutral. A Conversion or Reversal is a locked trade and hence its value is wholly independent of the price of the underlying. The options position in a Conversion will create a synthetic short underlying and potential protloss will result from any pricing differential between this and the long underlying position. The options position within a Reversal will create a synthetic long underlying and so protloss realised will be xed to the difference between the price of the short underlying and the long synthetic underlying. Prot and loss characteristics at expiry: If the pricing differential can be exploited, a prot will occur. The extent of the mis-pricing between the underlying and synthetic underlying positions will translate into the level of prot realised. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta 0 0 0 gamma 0 0 0 theta 0 0 0 vega 0 0 0 As this is a form of arbitrage and profit is therefore independent of changes in the underlying, the positions value will be independent of the market, hence: Delta: Neutral Gamma: Neutral Theta: Neutral Vega: Neutral putcall parity ensures that implied volatility must be the same for both a call and a put with the same strike and expiry. 66 Delta Neutral Strategies The remaining delta neutral strategy trades made available by LIFFE, as listed on page 6 are not described in detail here. As with the Volatility Trade on pages 64 and 65, and the ConversionReversal on page 66, these strategies consist of an options strategy superimposed with a position in the underlying instrument. This has the effect of creating a position which is delta neutral under the prevailing market conditions. In order to maintain delta neutrality, the underlying position may need to be adjusted should the underlying, the volatility or the time to expiry change. Positions in the underlying asset have no gamma, theta or vega. Therefore, whilst the delta of the options strategy will be affected by the addition of the underlying position, the remaining greeks will be unaffected. 67 68 LIFFE Options a guide to trading strategies LIFFE Administration and Management (a wholly owned subsidiary of LIFFE (Holdings) plc) Cannon Bridge House. 1 Cousin Lane. London EC4R 3XX. United Kingdom Telephone: 44 (0) 20 7623 0444 Fax: 44 (0) 20 7588 3624 liffe Registered in England no 1591809 294802022000US. View Full Document This note was uploaded on 10182015 for the course IF 10 taught by Professor Nouet during the Spring 03915 term at cole Suprieure d039Ingnieurs Lonard de Vinci. Click to edit the document details
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