Thị trường quyền chọn tiền tệ và các chiến lược straddle strangle, bull spread,bear spread, đề thi đáp án môn kinh doanh ngoại hối Đại học Mở 2016

MINISTRY OF EDUCATION AND TRAINING HO CHI MINH CITY OPEN UNIVERSITY SCHOOL OF ADVANCED STUDY FACULTY 09/2016 GROUP ASSIGNMENT FOREX TRADING SUBJECT GROUP ONE Lecturer: MBA Pham Thu Huong Content A Straddle Long straddle I Definition: Employment 3 Payoff diagram and general formula for calculating profit: 4 Example: II Short Straddle: Definition: Employment: Payoff diagram and general formula for calculating profit: Example: B Strangle 10 Long strangle: 10 I Definition: 11 Employment: 11 Payoff diagram and general formula for calculating profit: 11 Example: 13 II Short strangle: 14 Definition: 14 Employment: 14 Payoff diagram and general formula for calculating profit: 15 Example: 16 C Bull spread 17 Bull call Spread: 18 I Definition: 18 Employment: 18 Pay off diagram and general formula for calculating profit: 18 Example: 20 II Bull Put Spread: 21 Definition: 21 Employment: 21 Payoff diagram and general formula for calculating profit: 21 Example: 23 D Bear spread: 24 Bear Call Spread: 24 I Definition: 24 Employment: 24 Payoff diagram and general formula for calculating profit: 25 Example: 26 II Bear Put Spread: 27 Definition: 27 Employment: 27 Payoff diagram and general formula for calculating profit: 28 Example: 29 KEY WORDS: 30 References: 32 A Straddle A straddle is an options strategy in which the investor holds a position in both a call and put with the same strike price and expiration date, paying both premiums This strategy allows the investor to make a profit regardless of whether the exchange rate goes up or down I Long straddle Definition: Long straddle options are unlimited profit, limited risk options trading strategies that are used when the options trader thinks that the underlying currency will experience significant volatility in the near term Employment  To creating a long straddle position is to purchase one call option and one put option Both options must have the same strike price and expiration date  Long straddle positions have unlimited profit and limited risk If the price of the underlying currency continues to increase, the potential profit is unlimited If the price of the underlying currency goes to zero, the profit would be the strike price less the premiums paid for the options In either case, the maximum risk is the total cost to enter the position, which is the price of the call option plus the price of the put option  Long straddle used by investor when they expect the fluctuation of the currency in any case in the future 3 Payoff diagram and general formula for calculating profit: We have: ST: the spot rate of underlying currency F1: the premium paid of long call option contract F2: the premium paid of long put option contract X: the strike price of long call and long put contract Total fee have to pay when the investor take long call and long put straddle is: F1+F2 Table 1: Payoff that investor receive when expiration coming in each case: Spot rate(ST) Payoff from Payoff from Total long call long put Total profit STX ST-X ST-X ST-X-(F1+F2) The formula for calculating profit is given below:  Maximum Profit = Unlimited  Profit Achieved When Price of Underlying > Strike Price of Long Call + Net Premium Paid OR Price of Underlying < Strike Price of Long Put Net Premium Paid  Profit = Price of Underlying - Strike Price of Long Call - Net Premium Paid OR Strike Price of Long Put - Price of Underlying - Net Premium Paid The formula for calculating maximum loss is given below:  Max Loss = Net Premium Paid + Commissions Paid  Max Loss Occurs When Price of Underlying = Strike Price of Long Call/Put There are break-even points for the long straddle position The breakeven points can be calculated using the following formulae  Upper Breakeven Point = Strike Price of Long Call + Net Premium Paid  Lower Breakeven Point = Strike Price of Long Put - Net Premium Paid Example: The A sign contract:  Have a long call option contract with Bank A to buy USD paid by VND with 100.000 USD with the exchange rate USD/VND 22.330D, month expiration, premium paid: 700/USD  Have a long put option contract with Bank B to buy USD paid by VND with 100.000 USD with the exchange rate USD/VND 22.330D, month expiration, premium paid: 500/USD Solution: We use the long straddle strategy Breakeven points: ST1= X – (F1 + F2) = 22,330 - (700 + 500) = 21,130VND ST2= X + (F1 + F2)= 22,330 + (700+500)= 23,530 VND Total cost have to pay when the investor take long straddle is: (700+500)*100,000 =120,000,000 VND Exchange rate Payoff from Payoff from Total long call long put Total profit 19,930 21,130 22,330 23,530 24,730 0 120,000,000 240,000,000 120,000,000 -120,000,000 120,000,000 240,000,000 120,000,000 0 240,000,000 120,000,000 120,000,000 240,000,000 Payoff diagram: II Short Straddle: Definition: Short straddles are limited profit, unlimited risk options trading strategies that are used when the options trader thinks that the underlying currency will experience little volatility in the near term Employment:  To create a short straddle position is to purchase one call option and one put option Both options must have the same strike price and expiration date  Short straddle positions have limited profit and unlimited risk If the price of the underlying currency continues to increase, the potential profit is limited If the price of the underlying currency goes to zero, the profit would be the strike price less the premiums paid for the options In either case, the maximum risk is the total cost to enter the position, which is the price of the call option plus the price of the put option  Short straddle used by investor when they expect the slight fluctuation of the currency in any case in the future Payoff diagram and general formula for calculating profit: We have : ST: the spot rate of underlying currency F1: the premium paid of long call option contract F2: the premium paid of long put option contract X: the strike price of long call and long put contract Total fee that the seller get from short call and short put is F1+F2 Table 2: Payoff that seller receive when expiration coming in each case: Spot rate (ST) Payoff from short call Payoff from short put Total Total profit ST< X - (X - ST) - (X - ST) - (X - ST) + (F1+F2) ST= X 0 (F1 +F2) ST> X -(ST - X) -(ST - X) -(ST - X) + (F1 +F2) The formula for calculating profit is given below:  Profit = Net Premium Received - Commissions Paid  Max Profit Achieved When Price of Underlying = Strike Price of Short Call/Put The formula for calculating loss is given below:  Maximum Loss = Unlimited  Loss Occurs When Price of Underlying > Strike Price of Short Call + Net Premium Received OR Price of Underlying < Strike Price of Short Put Net Premium Received  Loss = Price of Underlying - Strike Price of Short Call - Net Premium Received OR Strike Price of Short Put - Price of Underlying - Net Premium Received + Commissions Paid There are break-even points for the short straddle position The breakeven points can be calculated using the following formulae  Upper Breakeven Point = Strike Price of Short Call + Net Premium Received  Lower Breakeven Point = Strike Price of Short Put - Net Premium Received Example: The A sign contract:  Have a short call option contract with Bank A to buy USD paid by VND with 100.000 USD with the exchange rate USD/VND 22.330D, month expiration, premium paid: 700/USD  Have a short put option contract with Bank B to buy USD paid by VND with 100.000 USD with the exchange rate USD/VND 22.330D, month expiration, premium paid: 500/USD Solution: We use the long straddle strategy Breakeven points: ST1= X – (F1 + F2) = 22,330 - (700 + 500) = 21,130VND ST2= X + (F1 + F2)= 22,330 + (700+500)= 23,530 VND Total cost have to pay when the investor take long straddle is: (700+500)*100,000 =120,000,000 VND Exchange rate 19,930 21,130 22,330 23,530 24,730 Payoff from long call 0 -120,000,000 - 240,000,000 Payoff from long put -240,000,000 -120,000,000 0 Payoff diagram: Total Total profit -240,000,000 -120,000,000 -120,000,000 -240,000,000 -120,000,000 120,000,000 -120,000,000 Example: An Investor predicts the dollar will increase against Viet Nam Dong So that, they bought a put option (1 USD /contract) with the strike price 20.000VND/USD, premium 60 VND and sold a put option (1 USD/contract ) with strike price 21.000 VND/USD, premium 100 VND, expiration date : months at the same time Calculate profit with these spot price below The net initial profit USD makes : 100 - 60 = 40 VND Exchange rate Profit from long put option Profit from short put option Profit 100 USD make 19,000 940 -1900 -960 20,000 -60 -900 -960 20,500 -60 -400 -460 21,000 -60 100 40 21,500 -60 100 40 We have the breakeven point: X2 - ST* = F2 - F1 => ST*=X2 + F1 - F2 = 21.000 + 60 - 100 = 20,840 VND 23 D Bear spread: A bear spread is an option strategy seeking maximum profit when the price of the underlying currency declines The strategy involves the simultaneous purchase and sale of options; puts or calls can be used A higher strike price is purchased and a lower strike price is sold The options should have the same expiration date I Bear Call Spread: Definition: A bear call spread is a type of vertical spread It contains two calls with the same expiration but different strikes The strike price of the short call is below the strike of the long call, which means this strategy will always generate a net cash inflow (net credit) at the outset The short call's main purpose is to generate income, whereas the long call simply helps limit the upside risk Employment: The bear call spread option trading strategy is employed when the options trader thinks that the price of the underlying currency will go down moderately in the near term 24 The bear call spread option strategy is also known as the bear call credit spread as a credit is received upon entering the trade Bear Call Spread Construction:  Buy OTM Call  Sell ITM Call Bear call spreads can be implemented by buying call options of a certain strike price and selling the same number of call options of lower strike price on the same underlying currency expiring in the same date Payoff diagram and general formula for calculating profit: We have: ST: the spot rate of underlying currency F1: the premium paid of long call option contract F2: the premium paid of short call option contract X1: the strike price of long call contract X2: the strike price of short call contract Net credit received = F2- F1 Table 7: Payoff that the options trader receive when expiration coming in each case: 25 Spot rate ST Payoff from long call Payoff from short call Total Total profit ST ≤ X2 0 F2- F1 X2