... 0.080 −9.93 6. 56 2.71
55 0.51 19.28 0. 060 6. 55 4.53 1.00
60 0.08 4.07 0.020 −2.05 1.44 0.21
65 0.01 0.54 0.003 −0. 36 0. 26 0.03
c04 JWBK147-Smith May 8, 2008 9:48 Char Count=
52 WHY AND HOW OPTION ... in foreign interest rates. This
is only used in foreign exchange options. It has no impact on any other
options. Foreign exchange options are affected by phi because options ar...
... classic forecasting techniques, such as regres-
sion analysis, time series analysis, and even classic chart patterns such as
head and shoulders and trendlines. However, professional options traders
will ... bullish or bearish on the implied volatility and therefore
on the options. Figure 6. 2 shows the current situation with implied and
historical volatility for IBM. I think...
... Vega
Oct 120 C −1.20 26. 24 −30 −.0 56 .0 766 −.0821
Oct 105 C 11.40 31 .67 .98 .0 06 −.0210 .0081
Net Position −$70 .68 −.050 .0 566 −. 064
c 06 JWBK147-Smith May 8, 2008 9:52 Char Count=
82 OPTION STRATEGIES
receive ... −.0919
c 06 JWBK147-Smith May 8, 2008 9:52 Char Count=
Selecting a Strategy 81
FIGURE 6. 3 October Calls
We would pay $11,555 for the 100 shares and receive $2,500...
... decline and the risk if there is no decline.
Thus, for an excellent guide to the relative risk and reward of holding
various options, take the implied or estimated volatility for each stock, esti-
mate ... are trading for $4 and the out-of-the-money options are trading for
$2. This means that you could have twice as many of the out-of-the-money
options as you could of the...
... down and
forward—keep some of your original write, and roll down and for-
ward some into the next expiration month. Note that rolling down and
forward restricts the maximum profit potential for ... stock $1 96, 950
+ Stock commissions +1,300
− Options premium received −5 ,68 8
+ Options commissions +390
Net investment required $192,952
Example 10.2 Return-if-exercised–Commo...
... The
net price you want is $62 + $4, or $66 . Although unlikely, the net order
could be filled at $65 and $1 or at $59 and $7. Your analysis has been pred-
icated on getting $62 and $4. In most cases, ... roll up and forward—keep
some of your original write and roll up and forward some into the next
expiration month. Note that rolling up and forward restricts the maxi-
mum profit p...
... Therefore, you must
continually adjust the ratio of the long to short options.
For example, you are long 100 options on the S&P 500 futures contract
with a strike of 530 and a delta of 0 .69 , and ... the options on Treasury-
bond futures using the September and December 96
0
/
32
strikes when the
price of the underlying futures contract is 96
5
/
32
. These options, being...
... debit is $6. The strike price,
$60 , plus the net debit, $6, gives an up-side break-even of $66 . The strike
price, $60 , minus the net debit, $6, gives a down-side break-even of $54.
For another ... net credit
For example, suppose you initiated a long straddle using options on
Textron for December expiration. Textron is trading at 59
3
/
4
, so you buy
the 60 call and the 60 put...