Description
One of the interesting developments in financial markets over the last 15 to 20 years has been the growing popularity of derivatives or contingent claims. In many situations, both hedgers and speculators find it more attractive to trade a derivative on an asset than to trade the asset itself.
A
Project
On
Study of Nifty Derivatives
&
Risk Minimization Trading Strategy
IN PARTIAL FULFILMENT FOR THE REQUIREMT OF THE PROJECT
STUDY COURSE OF TWO YEAR (FULL TIME) M.B.A. PROGRAMME
N.R. nstitute of !usiness Management
!atc" #$%%&'$%(%
Su)mitted )y# *uided )y#
Ankit S"a" +%&%,(- Prof. Anja.i /"oksi
As"is" As"ara +%&%%0-
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N. R. nstitute of !usiness Management
CERTIFICATE FROM INSTITUTE
This is to certify that Mr. Ankit Shah and Mr.
Ashish Ashara, students of MBA (2008-10 batch) at N.R.
nstitute of Business Mana!e"ent, #u$arat %ni&ersity,
Ah"edabad ha&e 're'ared a #rand (ro$ect on “Study of
Nifty Derivatives Risk Mini!i"ation Tradin#
Strate#ies$ in 'artia) fu)*))"ent of t+o years fu))-ti"e
MBA (ro!ra" of #u$arat %ni&ersity. This 'ro$ect +or, has
been underta,en under the !uidance of %rof. An&a'i
Choksi, core facu)ty at N.R. nstitute of Business
Mana!e"ent, #u$arat %ni&ersity, Ah"edabad.
This is a)so to ascertain that this 'ro$ect has been
're'ared on)y for the a+ard of MBA de!ree and has not
been sub"itted for any other 'ur'ose.
Dr. Hitesth Ruparel Prof. Anjali
Choksi
N.R.INSTITUTE OF BUSINESS MANAGEMENT
Director Core faculty
_________________ _________________
Date: 20/03/200
Place: Ah!e"a#a"
N.R.INSTITUTE OF BUSINESS MANAGEMENT
PREFACE
Derivatives occupy a very significant place in the field of finance and are
virtually driving the global financial markets of the day. Several markets of
the world have witnessed a phenomenal rise in trading derivative
instruments over a past three decades.
With the world embracing the derivatives trading on a large scale, the Indian
market obviously cannot remain aloof, especially after liberalization has been
set in motion.
Derivatives are like a deep ocean of knowledge for the learners of finance.
The reason to choose this subect was the emergence of derivatives trading
in the different sectors of the Indian economy. Derivatives are the means to
achieve the obectives like risk management by fund managers and hedging
by traders. !y looking at the importance of the derivatives we make an
attempt to determine the trend of "ifty and on the basis of that framing
trading strategies to minimize the risk while ma#imize the profit e#posure.
This proect would be a powerful base for us to undergo further studies in
the risk management field and even in the field of finance as a whole.
N.R.INSTITUTE OF BUSINESS MANAGEMENT
ACKNOWLEDGEMENT
$oti vati on and co%operati on are the mai n two pi ll ars on whi ch the
success of any proect rel i es. So fi rst of all we woul d li ke to thank
core facul ty and our proect gui de &rof . Anjali Choksi who made
us aware about the proect and moti vated us to work on the
gui del i nes of this uni 'ue, new and knowl edge based proect. She
has gui ded us at each and every stage of the proect. She has
been enthusi astical l y i nvol ved i n every aspects of the proect.
(veral l we are highl y i ndebted to her for al l the knowl edge,
gui dance and moti vati on that she has provi ded us throughout our
proect.
We would al so l i ke to thank our fri ends and those who have
hel ped us duri ng this proect di rectl y or i ndi rectl y.
)very person wants to prove himsel f i n this fast, dynami c and cut%
throat competi ti ve worl d. When he*she gets an opportuni ty to do
so then he or she wi l l fi nd that success is very near to hi m*her.
So, we would li ke to acknowl edge our thanks to our Director
Prof. itesh R!"arel who gave us opportuni ty to prove
oursel ves. We al so woul d l i ke to e#press our grati tude to our
proect Co#or$inator Mr.%!nil c.%hah &'ice#"resi$ent Arca$ia
%hares ( stock )rokers "*t lt$ ( Mr. Kal"esh $.%hah
&)!siness Associate# Arca$ia shares ( stock +rokers P*t
lt$, an$ the Mana-er of Arca$ia %hares ( stock +rokers P*t
Lt$. for thei r ki nd support and assi stance.
+",IT S-+-
+S-IS- +S-+.+
N.R.INSTITUTE OF BUSINESS MANAGEMENT
121/3T41 S3MMAR5
(ne of the interesting developments in financial markets over the last /0 to
12 years has been the growing popularity of derivatives or contingent
claims. In many situations, both hedgers and speculators find it more
attractive to trade a derivative on an asset than to trade the asset itself.
Some derivatives are traded on e#changes. (thers are made available to
corporate clients by financial institutions or added to new issues of securities
by underwriters.
In this report we have included history of Derivatives. Than we have
included Derivatives $arket in India. Than after we have included stock
market Derivatives.
In this report we have taken a first look at forward, futures and options
contracts. + forward or futures contract involves an obligation to buy or sell
an asset at a certain time in the future for a certain price. There are two
types of options3 calls and puts. + call option gives the holder the right to
buy an asset by a certain date for a certain price. In India the derivatives
market has grown very rapidly. There are mainly three types of traders3
hedgers, speculators and arbitrageurs.
In the ne#t section, we have tried to determine the study of "ifty derivatives
for the short term period using the two important indicators namely (pen
Interest 4 &ut*5all .atio. In which &ut*5all .atio analysis proves to be more
effective indicators. $oreover in the analysis of &ut*5all .atio, 5ombination
of (pen Interest 4 6olume gives more accurate results.
In the last section, we have determined different trading strategies for
different market views i.e. !ullish, !earish, .ange bound 4 6olatile. (n the
basis of investors7 perceptions they can use suited strategies which will
minimize the loss. There are also some arbitrage strategies prevailing in the
market like reversal, conversion etc. which give fi# amount of profit
irrespective of market movements but it is not readily available in the
market but one has to grab such (pportunities.
&8+5)3 +-$)D+!+D
N.R.INSTITUTE OF BUSINESS MANAGEMENT
D+T) 3 12*29*12/2
INDEX
%r.
no To"ics
P-.
no.
/
I"T.(D:5TI(" T( I"DI+" 5+&IT+8 $+.,)T
/
1 I"T.(D:5TI(" T( D).I6+TI6)S
;
9
D)6)8(&$)"T (< D).I6+TI6)S $+.,)T I"
I"DI+
=
;
.)S)+.5- $)T-(D(8(>?
/1
0
ST(5, $+.,)T D).I6+TI6)S
/0
@ I"T.(D:5TI(" T( I" 3
? O"en /nterest
? P!t0Call Ratio
CbD.IS, $I"I$IE+TI(" T.+DI"> ST.+T)>I)S :SI">
ain *
8oss on
,p1
Total
>ain*8oss
@22 A.B0 %/1./0 //.= 1B./ /0.=0
@2/ A.B0 %//./0 //.= 1A./ /0.=0
@21 A.B0 %/2./0 //.= 1@./ /0.=0
@29 A.B0 %=./0 //.= 10./ /0.=0
@2; A.B0 %B./0 //.= 1;./ /0.=0
@20 A.B0 %A./0 //.= 19./ /0.=0
@2@ A.B0 %@./0 //.= 11./ /0.=0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&>, Co*ere$ P!t Writin-
DE%CR/PT/ON3 % Short &osition in the underlying 4 Short &osition on &ut at a low Strike
&rice
PA.OFF:
• +t St N So T &remium .eceived, there is no profit , "o 8oss
• +t StX , or St N ,, &rofit is fi#edR i,e >ain on :nderlying T*% >ain * 8oss on (ption
&osition
• +t St Y ,, &rofit on :nderlying is Increased by the amount of &remium !ut only
upto FSo T &remium .eceivedG, after that there is loss
WEN TO 2%E: # When the Trader is !earish
5urrent &rice of the Stock N @;B
Strike &rice N , N @;2
&remium of &ut (ption N .s.//.=
PA.#OFF TA)LE
&rice of
Stock on
)#piry Day
F St G
>ain *
8oss on
Stock
FSo % StG
&remium
.eceived
F 5 G
&rofit *
8oss on
(ption
&osition
Total
&rofit *
8oss
@10 19 //.= %9./ /=.=
@1B 12 //.= %2./ /=.=
@92 /B //.= /.= /=.=
@90 /9 //.= @.= /=.=
@9B /2 //.= =.= /=.=
@;2 B //.= //.= /=.=
@;1 @ //.= //.= /A.=
@;0 9 //.= //.= /;.=
@;B 2 //.= //.= //.=
@01 %; //.= //.= A.=
@0B %/2 //.= //.= /.=
@@2 %/1 //.= //.= %2./
@@0 %/A //.= //.= %0./
@A2 %11 //.= //.= %/2./
@A0 %1A //.= //.= %/0./
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&?, Protecti*e Call )!6in-
DE%CR/PT/ON3 % Short on :nderlying 4 8ong on 5all for a -igher Strike &riceV
PA.OFF:
• +t St N So % &remium &aid, there is no &rofit no 8oss
• +t St NSo or St Y ,, 8oss is ain *
8oss on
Stock
FSo % StG
&remium
&aid
F 5 G
&rofit *
8oss on
(ption
&osition
Total
&rofit *
8oss
@12 1B /;.;0 %/;.;0 /9.00
@10 19 /;.;0 %/;.;0 B.00
@1B 12 /;.;0 %/;.;0 0.00
@99 /0 /;.;0 %/;.;0 2.00
@9B /2 /;.;0 %/;.;0 %;.;0
@;1 @ /;.;0 %/;.;0 %B.;0
@;0 9 /;.;0 %/;.;0 %//.;0
@;B 2 /;.;0 %/;.;0 %/;.;0
@01 %; /;.;0 %/;.;0 %/B.;0
@00 %A /;.;0 %/;.;0 %1/.;0
@@2 %/1 /;.;0 %/;.;0 %1@.;0
@@0 %/A /;.;0 %=.;0 %1@.;0
@@B %12 /;.;0 %@.;0 %1@.;0
@A1 %1; /;.;0 %1.;0 %1@.;0
@A0 %1A /;.;0 2.00 %1@.;0
@B2 %91 /;.;0 0.00 %1@.;0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&;, Re*erse Collar %trate-6
DE%CR/PT/ON3 % Short on :nderlying, 8ong on 5all at higher &rice 4 Short on &ut at a low
price.
PA.OFF:
• +t St N So
% &remium
&aid, there
is no profit
no loss
• +t St ] ,p,
&ofit is
fi#ed
• +t St ^ ,c ,
8oss is
fi#ed
When to 2se3 % When u have a bearish (utlook
5urrent &rice of the Stock N @;B
Strike &rice of &ut (ption N @;2
&remium of &ut (ption N .s.//.=
Strike &rice of 5all (ption N @@2
&remium of 5all (ption N/;.;0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
PA.#OFF TA)LE
&rice of
Stock on
)#piry Day
F St G
>ain *
8oss on
Stock
FSo % StG
&remium
&aid
F 5 G
&rofit *
8oss on
5all
&osition
&remium
.eceived
F & G
&rofit *
8oss on
&ut
&osition
Total
&rofit *
8oss
@10 19 /;.;0 %/;.;0 //.= %9./ 0.;0
@92 /B /;.;0 %/;.;0 //.= /.= 0.;0
@90 /9 /;.;0 %/;.;0 //.= @.= 0.;0
@;2 B /;.;0 %/;.;0 //.= //.= 0.;0
@;1 @ /;.;0 %/;.;0 //.= //.= 9.;0
@;0 9 /;.;0 %/;.;0 //.= //.= 2.;0
@;B 2 /;.;0 %/;.;0 //.= //.= %1.00
@01 %; /;.;0 %/;.;0 //.= //.= %@.00
@00 %A /;.;0 %/;.;0 //.= //.= %=.00
@0B %/2 /;.;0 %/;.;0 //.= //.= %/1.00
@@2 %/1 /;.;0 %/;.;0 //.= //.= %/;.00
@@9 %/0 /;.;0 %//.;0 //.= //.= %/;.00
@@B %12 /;.;0 %@.;0 //.= //.= %/;.00
@A1 %1; /;.;0 %1.;0 //.= //.= %/;.00
@A0 %1A /;.;0 2.00 //.= //.= %/;.00
@B2 %91 /;.;0 0.00 //.= //.= %/;.00
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&ain *
8oss on
,p/
&remium
for ,c1
>ain * 8oss
on ,c1
&remium
for ,p1
>ain * 8oss
on ,p1
&remium
for ,c9
>ain *
8oss on
,c9
Total
>ain*8oss
@/0 19.B %[email protected] /;.;0 %/;.;0 1;.10 12.A0 /9.= /9.= %@
@/@ 19.B %1;.1 /;.;0 %/;.;0 1;.10 /=.A0 /9.= /9.= %0
@/A 19.B %11.1 /;.;0 %/;.;0 1;.10 /B.A0 /9.= /9.= %;
@/B 19.B %12.1 /;.;0 %/;.;0 1;.10 /A.A0 /9.= /9.= %9
@/= 19.B %/B.1 /;.;0 %/;.;0 1;.10 /@.A0 /9.= /9.= %1
@12 19.B %/@.1 /;.;0 %/;.;0 1;.10 /0.A0 /9.= /9.= %/
@1/ 19.B %/;.1 /;.;0 %/;.;0 1;.10 /;.A0 /9.= /9.= 2
@11 19.B %/1.1 /;.;0 %/;.;0 1;.10 /9.A0 /9.= /9.= /
@19 19.B %/2.1 /;.;0 %/;.;0 1;.10 /1.A0 /9.= /9.= 1
@1; 19.B %B.1 /;.;0 %/;.;0 1;.10 //.A0 /9.= /9.= 9
@10 19.B %@.1 /;.;0 %/;.;0 1;.10 /2.A0 /9.= /9.= ;
@1@ 19.B %;.1 /;.;0 %/;.;0 1;.10 =.A0 /9.= /9.= 0
@1A 19.B %1.1 /;.;0 %/;.;0 1;.10 B.A0 /9.= /9.= @
@1B 19.B %2.1 /;.;0 %/;.;0 1;.10 A.A0 /9.= /9.= A
@1= 19.B /.B /;.;0 %/;.;0 1;.10 @.A0 /9.= /9.= B
@92 19.B 9.B /;.;0 %/;.;0 1;.10 0.A0 /9.= /9.= =
@9/ 19.B 0.B /;.;0 %/;.;0 1;.10 ;.A0 /9.= /9.= /2
@91 19.B A.B /;.;0 %/;.;0 1;.10 9.A0 /9.= /9.= //
@99 19.B =.B /;.;0 %/;.;0 1;.10 1.A0 /9.= /9.= /1
@9; 19.B //.B /;.;0 %/;.;0 1;.10 /.A0 /9.= /9.= /9
@90 19.B /9.B /;.;0 %/;.;0 1;.10 2.A0 /9.= /9.= /;
@9@ 19.B /0.B /;.;0 %/;.;0 1;.10 %2.10 /9.= /9.= /0
@9A 19.B /A.B /;.;0 %/;.;0 1;.10 %/.10 /9.= /9.= /@
@9B 19.B /=.B /;.;0 %/;.;0 1;.10 %1.10 /9.= /9.= /A
@9= 19.B 1/.B /;.;0 %/;.;0 1;.10 %9.10 /9.= /9.= /B
@;2 19.B 19.B /;.;0 %/;.;0 1;.10 %;.10 /9.= /9.= /=
@;/ 19.B 19.B /;.;0 %/;.;0 1;.10 %0.10 /9.= /9.= /B
@;1 19.B 19.B /;.;0 %/;.;0 1;.10 %@.10 /9.= /9.= /A
@;9 19.B 19.B /;.;0 %/;.;0 1;.10 %A.10 /9.= /9.= /@
@;; 19.B 19.B /;.;0 %/;.;0 1;.10 %B.10 /9.= /9.= /0
@;0 19.B 19.B /;.;0 %/;.;0 1;.10 %=.10 /9.= /9.= /;
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@;@ 19.B 19.B /;.;0 %/;.;0 1;.10 %/2.10 /9.= /9.= /9
@;A 19.B 19.B /;.;0 %/;.;0 1;.10 %//.10 /9.= /9.= /1
@;B 19.B 19.B /;.;0 %/;.;0 1;.10 %/1.10 /9.= /9.= //
@;= 19.B 19.B /;.;0 %/;.;0 1;.10 %/9.10 /9.= /9.= /2
@02 19.B 19.B /;.;0 %/;.;0 1;.10 %/;.10 /9.= /9.= =
@0/ 19.B 19.B /;.;0 %/;.;0 1;.10 %/0.10 /9.= /9.= B
@01 19.B 19.B /;.;0 %/;.;0 1;.10 %/@.10 /9.= /9.= A
@09 19.B 19.B /;.;0 %/;.;0 1;.10 %/A.10 /9.= /9.= @
@0; 19.B 19.B /;.;0 %/;.;0 1;.10 %/B.10 /9.= /9.= 0
@00 19.B 19.B /;.;0 %/;.;0 1;.10 %/=.10 /9.= /9.= ;
@0@ 19.B 19.B /;.;0 %/;.;0 1;.10 %12.10 /9.= /9.= 9
@0A 19.B 19.B /;.;0 %/;.;0 1;.10 %1/.10 /9.= /9.= 1
@0B 19.B 19.B /;.;0 %/;.;0 1;.10 %11.10 /9.= /9.= /
@0= 19.B 19.B /;.;0 %/;.;0 1;.10 %19.10 /9.= /9.= 2
@@2 19.B 19.B /;.;0 %/;.;0 1;.10 %1;.10 /9.= /9.= %/
@@/ 19.B 19.B /;.;0 %/9.;0 1;.10 %1;.10 /9.= /9.= 2
@@1 19.B 19.B /;.;0 %/1.;0 1;.10 %1;.10 /9.= /9.= /
@@9 19.B 19.B /;.;0 %//.;0 1;.10 %1;.10 /9.= /9.= 1
@@; 19.B 19.B /;.;0 %/2.;0 1;.10 %1;.10 /9.= /9.= 9
@@0 19.B 19.B /;.;0 %=.;0 1;.10 %1;.10 /9.= /9.= ;
@@@ 19.B 19.B /;.;0 %B.;0 1;.10 %1;.10 /9.= /9.= 0
@@A 19.B 19.B /;.;0 %A.;0 1;.10 %1;.10 /9.= /9.= @
@@B 19.B 19.B /;.;0 %@.;0 1;.10 %1;.10 /9.= /9.= A
@@= 19.B 19.B /;.;0 %0.;0 1;.10 %1;.10 /9.= /9.= B
@A2 19.B 19.B /;.;0 %;.;0 1;.10 %1;.10 /9.= /9.= =
@A/ 19.B 19.B /;.;0 %9.;0 1;.10 %1;.10 /9.= /9.= /2
@A1 19.B 19.B /;.;0 %1.;0 1;.10 %1;.10 /9.= /9.= //
@A9 19.B 19.B /;.;0 %/.;0 1;.10 %1;.10 /9.= /9.= /1
@A; 19.B 19.B /;.;0 %2.;0 1;.10 %1;.10 /9.= /9.= /9
@A0 19.B 19.B /;.;0 2.00 1;.10 %1;.10 /9.= /9.= /;
@A@ 19.B 19.B /;.;0 /.00 1;.10 %1;.10 /9.= /9.= /0
@AA 19.B 19.B /;.;0 1.00 1;.10 %1;.10 /9.= /9.= /@
@AB 19.B 19.B /;.;0 9.00 1;.10 %1;.10 /9.= /9.= /A
@A= 19.B 19.B /;.;0 ;.00 1;.10 %1;.10 /9.= /9.= /B
@B2 19.B 19.B /;.;0 0.00 1;.10 %1;.10 /9.= /9.= /=
@B/ 19.B 19.B /;.;0 @.00 1;.10 %1;.10 /9.= //.= /B
@B1 19.B 19.B /;.;0 A.00 1;.10 %1;.10 /9.= =.= /A
@B9 19.B 19.B /;.;0 B.00 1;.10 %1;.10 /9.= A.= /@
@B; 19.B 19.B /;.;0 =.00 1;.10 %1;.10 /9.= 0.= /0
@B0 19.B 19.B /;.;0 /2.00 1;.10 %1;.10 /9.= 9.= /;
@B@ 19.B 19.B /;.;0 //.00 1;.10 %1;.10 /9.= /.= /9
@BA 19.B 19.B /;.;0 /1.00 1;.10 %1;.10 /9.= %2./ /1
@BB 19.B 19.B /;.;0 /9.00 1;.10 %1;.10 /9.= %1./ //
@B= 19.B 19.B /;.;0 /;.00 1;.10 %1;.10 /9.= %;./ /2
@=2 19.B 19.B /;.;0 /0.00 1;.10 %1;.10 /9.= %@./ =
@=/ 19.B 19.B /;.;0 /@.00 1;.10 %1;.10 /9.= %B./ B
@=1 19.B 19.B /;.;0 /A.00 1;.10 %1;.10 /9.= %/2./ A
@=9 19.B 19.B /;.;0 /B.00 1;.10 %1;.10 /9.= %/1./ @
@=; 19.B 19.B /;.;0 /=.00 1;.10 %1;.10 /9.= %/;./ 0
@=0 19.B 19.B /;.;0 12.00 1;.10 %1;.10 /9.= %/@./ ;
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@=@ 19.B 19.B /;.;0 1/.00 1;.10 %1;.10 /9.= %/B./ 9
@=A 19.B 19.B /;.;0 11.00 1;.10 %1;.10 /9.= %12./ 1
@=B 19.B 19.B /;.;0 19.00 1;.10 %1;.10 /9.= %11./ /
@== 19.B 19.B /;.;0 1;.00 1;.10 %1;.10 /9.= %1;./ 2
A22 19.B 19.B /;.;0 10.00 1;.10 %1;.10 /9.= %1@./ %/
A2/ 19.B 19.B /;.;0 [email protected] 1;.10 %1;.10 /9.= %1B./ %1
A21 19.B 19.B /;.;0 1A.00 1;.10 %1;.10 /9.= %92./ %9
A29 19.B 19.B /;.;0 1B.00 1;.10 %1;.10 /9.= %91./ %;
A2; 19.B 19.B /;.;0 1=.00 1;.10 %1;.10 /9.= %9;./ %0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&>, Christ5as Tree
DE%CR/PT/ON3 % 8ong on / 5all at low Strike &rice ,/, Short on / 5all at higher Strike
&rice ,1 4 Short / 5all at -igher Strike &rice ,9
PA.OFF:
• St ] ,c/, there is fi#ed profit of net premium .eceived
• +t ,c1 ^ St ^ ,c/, &rofit increases 8inearly with rise
in St
• +t ,c9 ^ St ^ ,c1, There is fi#ed &rofit of "et
&remium received T ,9% ,1
• +t St Y ,c9, &rofit reduces linearly with rise in St
WEN TO 2%E 3%
+ Trader is confident of a .ange !ound St, not too 6olatile
5urrent &rice of the Stock NSoN @;B
Strike &rice of 5all (ptionN,c/N @;2
&remium of 5all (ption N,/N .s. 12.1
Strike &rice of 5all (ptionN,c1N @@2
&remium of 5all (ption N,1N .s. /;.;0
Strike &rice of 5all (ptionN,c9N @B2
&remium of 5all (ption N,c9N .s. @.=0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
PA.#OFF TA)LE
St
&remium
for ,c/
>ain *
8oss on
,c/
&remium
for ,c1
>ain *
8oss on
,c1
&remium
for ,c9
>ain *
8oss on
,c9
Total
>ain*8oss
@90 12.1 %12.1 /;.;0 /;.;0 @.=0 @.=0 /.1
@9@ 12.1 %12.1 /;.;0 /;.;0 @.=0 @.=0 /.1
@9A 12.1 %12.1 /;.;0 /;.;0 @.=0 @.=0 /.1
@9B 12.1 %12.1 /;.;0 /;.;0 @.=0 @.=0 /.1
@9= 12.1 %12.1 /;.;0 /;.;0 @.=0 @.=0 /.1
@;2 12.1 %12.1 /;.;0 /;.;0 @.=0 @.=0 /.1
@;/ 12.1 %/=.1 /;.;0 /;.;0 @.=0 @.=0 1.1
@;1 12.1 %/B.1 /;.;0 /;.;0 @.=0 @.=0 9.1
@;9 12.1 %/A.1 /;.;0 /;.;0 @.=0 @.=0 ;.1
@;; 12.1 %/@.1 /;.;0 /;.;0 @.=0 @.=0 0.1
@;0 12.1 %/0.1 /;.;0 /;.;0 @.=0 @.=0 @.1
@;@ 12.1 %/;.1 /;.;0 /;.;0 @.=0 @.=0 A.1
@;A 12.1 %/9.1 /;.;0 /;.;0 @.=0 @.=0 B.1
@;B 12.1 %/1.1 /;.;0 /;.;0 @.=0 @.=0 =.1
@;= 12.1 %//.1 /;.;0 /;.;0 @.=0 @.=0 /2.1
@02 12.1 %/2.1 /;.;0 /;.;0 @.=0 @.=0 //.1
@0/ 12.1 %=.1 /;.;0 /;.;0 @.=0 @.=0 /1.1
@01 12.1 %B.1 /;.;0 /;.;0 @.=0 @.=0 /9.1
@09 12.1 %A.1 /;.;0 /;.;0 @.=0 @.=0 /;.1
@0; 12.1 %@.1 /;.;0 /;.;0 @.=0 @.=0 /0.1
@00 12.1 %0.1 /;.;0 /;.;0 @.=0 @.=0 /@.1
@0@ 12.1 %;.1 /;.;0 /;.;0 @.=0 @.=0 /A.1
@0A 12.1 %9.1 /;.;0 /;.;0 @.=0 @.=0 /B.1
@0B 12.1 %1.1 /;.;0 /;.;0 @.=0 @.=0 /=.1
@0= 12.1 %/.1 /;.;0 /;.;0 @.=0 @.=0 12.1
@@2 12.1 %2.1 /;.;0 /;.;0 @.=0 @.=0 1/.1
@@/ 12.1 2.B /;.;0 /9.;0 @.=0 @.=0 1/.1
@@1 12.1 /.B /;.;0 /1.;0 @.=0 @.=0 1/.1
@@9 12.1 1.B /;.;0 //.;0 @.=0 @.=0 1/.1
@@; 12.1 9.B /;.;0 /2.;0 @.=0 @.=0 1/.1
@@0 12.1 ;.B /;.;0 =.;0 @.=0 @.=0 1/.1
@@@ 12.1 0.B /;.;0 B.;0 @.=0 @.=0 1/.1
@@A 12.1 @.B /;.;0 A.;0 @.=0 @.=0 1/.1
@@B 12.1 A.B /;.;0 @.;0 @.=0 @.=0 1/.1
@@= 12.1 B.B /;.;0 0.;0 @.=0 @.=0 1/.1
@A2 12.1 =.B /;.;0 ;.;0 @.=0 @.=0 1/.1
@A/ 12.1 /2.B /;.;0 9.;0 @.=0 @.=0 1/.1
@A1 12.1 //.B /;.;0 1.;0 @.=0 @.=0 1/.1
@A9 12.1 /1.B /;.;0 /.;0 @.=0 @.=0 1/.1
@A; 12.1 /9.B /;.;0 2.;0 @.=0 @.=0 1/.1
@A0 12.1 /;.B /;.;0 %2.00 @.=0 @.=0 1/.1
@A@ 12.1 /0.B /;.;0 %/.00 @.=0 @.=0 1/.1
@AA 12.1 /@.B /;.;0 %1.00 @.=0 @.=0 1/.1
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@AB 12.1 /A.B /;.;0 %9.00 @.=0 @.=0 1/.1
@A= 12.1 /B.B /;.;0 %;.00 @.=0 @.=0 1/.1
@B2 12.1 /=.B /;.;0 %0.00 @.=0 @.=0 1/.1
@B/ 12.1 12.B /;.;0 %@.00 @.=0 0.=0 12.1
@B1 12.1 1/.B /;.;0 %A.00 @.=0 ;.=0 /=.1
@B9 12.1 11.B /;.;0 %B.00 @.=0 9.=0 /B.1
@B; 12.1 19.B /;.;0 %=.00 @.=0 1.=0 /A.1
@B0 12.1 1;.B /;.;0 %/2.00 @.=0 /.=0 /@.1
@B@ 12.1 10.B /;.;0 %//.00 @.=0 2.=0 /0.1
@BA 12.1 [email protected] /;.;0 %/1.00 @.=0 %2.20 /;.1
@BB 12.1 1A.B /;.;0 %/9.00 @.=0 %/.20 /9.1
@B= 12.1 1B.B /;.;0 %/;.00 @.=0 %1.20 /1.1
@=2 12.1 1=.B /;.;0 %/0.00 @.=0 %9.20 //.1
@=/ 12.1 92.B /;.;0 %/@.00 @.=0 %;.20 /2.1
@=1 12.1 9/.B /;.;0 %/A.00 @.=0 %0.20 =.1
@=9 12.1 91.B /;.;0 %/B.00 @.=0 %@.20 B.1
@=; 12.1 99.B /;.;0 %/=.00 @.=0 %A.20 A.1
@=0 12.1 9;.B /;.;0 %12.00 @.=0 %B.20 @.1
@=@ 12.1 90.B /;.;0 %1/.00 @.=0 %=.20 0.1
@=A 12.1 [email protected] /;.;0 %11.00 @.=0 %/2.20 ;.1
@=B 12.1 9A.B /;.;0 %19.00 @.=0 %//.20 9.1
@== 12.1 9B.B /;.;0 %1;.00 @.=0 %/1.20 1.1
A22 12.1 9=.B /;.;0 %10.00 @.=0 %/9.20 /.1
A2/ 12.1 ;2.B /;.;0 %[email protected] @.=0 %/;.20 2.1
A21 12.1 ;/.B /;.;0 %1A.00 @.=0 %/0.20 %2.B
A29 12.1 ;1.B /;.;0 %1B.00 @.=0 %/@.20 %/.B
A2; 12.1 ;9.B /;.;0 %1=.00 @.=0 %/A.20 %1.B
A20 12.1 ;;.B /;.;0 %92.00 @.=0 %/B.20 %9.B
A2@ 12.1 ;0.B /;.;0 %9/.00 @.=0 %/=.20 %;.B
A2A 12.1 ;@.B /;.;0 %91.00 @.=0 %12.20 %0.B
A2B 12.1 ;A.B /;.;0 %99.00 @.=0 %1/.20 %@.B
A2= 12.1 ;B.B /;.;0 %9;.00 @.=0 %11.20 %A.B
A/2 12.1 ;=.B /;.;0 %90.00 @.=0 %19.20 %B.B
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&?, Ratio %"rea$
DE%CR/PT/ON: # 8ong on / 5all with low Strike &rice 4 Short on 1 5alls at higher Strike
&rice
PA.OFF3
• +t St X ,/, There is ain *
8oss on
,c/
&remium
for ,c1
>ain *
8oss on
,c1
&remium
for ,c9
>ain *
8oss on
,c9
Total
>ain*8oss
@92 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@9/ 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@91 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@99 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@9; 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@90 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@9@ 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@9A 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@9B 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@9= 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@;2 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@;/ 12.1 %/=.1 1B.= 1B.= @.=0 %@.=0 1.A0
@;1 12.1 %/B.1 1B.= 1B.= @.=0 %@.=0 9.A0
@;9 12.1 %/A.1 1B.= 1B.= @.=0 %@.=0 ;.A0
@;; 12.1 %/@.1 1B.= 1B.= @.=0 %@.=0 0.A0
@;0 12.1 %/0.1 1B.= 1B.= @.=0 %@.=0 @.A0
@;@ 12.1 %/;.1 1B.= 1B.= @.=0 %@.=0 A.A0
@;A 12.1 %/9.1 1B.= 1B.= @.=0 %@.=0 B.A0
@;B 12.1 %/1.1 1B.= 1B.= @.=0 %@.=0 =.A0
@;= 12.1 %//.1 1B.= 1B.= @.=0 %@.=0 /2.A0
@02 12.1 %/2.1 1B.= 1B.= @.=0 %@.=0 //.A0
@0/ 12.1 %=.1 1B.= 1B.= @.=0 %@.=0 /1.A0
@01 12.1 %B.1 1B.= 1B.= @.=0 %@.=0 /9.A0
@09 12.1 %A.1 1B.= 1B.= @.=0 %@.=0 /;.A0
@0; 12.1 %@.1 1B.= 1B.= @.=0 %@.=0 /0.A0
@00 12.1 %0.1 1B.= 1B.= @.=0 %@.=0 /@.A0
@0@ 12.1 %;.1 1B.= 1B.= @.=0 %@.=0 /A.A0
@0A 12.1 %9.1 1B.= 1B.= @.=0 %@.=0 /B.A0
@0B 12.1 %1.1 1B.= 1B.= @.=0 %@.=0 /=.A0
@0= 12.1 %/.1 1B.= 1B.= @.=0 %@.=0 12.A0
@@2 12.1 %2.1 1B.= 1B.= @.=0 %@.=0 1/.A0
@@/ 12.1 2.B 1B.= 1@.= @.=0 %@.=0 12.A0
@@1 12.1 /.B 1B.= 1;.= @.=0 %@.=0 /=.A0
@@9 12.1 1.B 1B.= 11.= @.=0 %@.=0 /B.A0
@@; 12.1 9.B 1B.= 12.= @.=0 %@.=0 /A.A0
@@0 12.1 ;.B 1B.= /B.= @.=0 %@.=0 /@.A0
@@@ 12.1 0.B 1B.= /@.= @.=0 %@.=0 /0.A0
@@A 12.1 @.B 1B.= /;.= @.=0 %@.=0 /;.A0
@@B 12.1 A.B 1B.= /1.= @.=0 %@.=0 /9.A0
@@= 12.1 B.B 1B.= /2.= @.=0 %@.=0 /1.A0
@A2 12.1 =.B 1B.= B.= @.=0 %@.=0 //.A0
@A/ 12.1 /2.B 1B.= @.= @.=0 %@.=0 /2.A0
@A1 12.1 //.B 1B.= ;.= @.=0 %@.=0 =.A0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@A9 12.1 /1.B 1B.= 1.= @.=0 %@.=0 B.A0
@A; 12.1 /9.B 1B.= 2.= @.=0 %@.=0 A.A0
@A0 12.1 /;.B 1B.= %/./ @.=0 %@.=0 @.A0
@A@ 12.1 /0.B 1B.= %9./ @.=0 %@.=0 0.A0
@AA 12.1 /@.B 1B.= %0./ @.=0 %@.=0 ;.A0
@AB 12.1 /A.B 1B.= %A./ @.=0 %@.=0 9.A0
@A= 12.1 /B.B 1B.= %=./ @.=0 %@.=0 1.A0
@B2 12.1 /=.B 1B.= %//./ @.=0 %@.=0 /.A0
@B/ 12.1 12.B 1B.= %/9./ @.=0 %0.=0 /.A0
@B1 12.1 1/.B 1B.= %/0./ @.=0 %;.=0 /.A0
@B9 12.1 11.B 1B.= %/A./ @.=0 %9.=0 /.A0
@B; 12.1 19.B 1B.= %/=./ @.=0 %1.=0 /.A0
@B0 12.1 1;.B 1B.= %1/./ @.=0 %/.=0 /.A0
@B@ 12.1 10.B 1B.= %19./ @.=0 %2.=0 /.A0
@BA 12.1 [email protected] 1B.= %10./ @.=0 2.20 /.A0
@BB 12.1 1A.B 1B.= %1A./ @.=0 /.20 /.A0
@B= 12.1 1B.B 1B.= %1=./ @.=0 1.20 /.A0
@=2 12.1 1=.B 1B.= %9/./ @.=0 9.20 /.A0
@=/ 12.1 92.B 1B.= %99./ @.=0 ;.20 /.A0
@=1 12.1 9/.B 1B.= %90./ @.=0 0.20 /.A0
@=9 12.1 91.B 1B.= %9A./ @.=0 @.20 /.A0
@=; 12.1 99.B 1B.= %9=./ @.=0 A.20 /.A0
@=0 12.1 9;.B 1B.= %;/./ @.=0 B.20 /.A0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&?, Lon- stra$$le
DE%CR/PT/ON3 % 8ong on / 5all 4 / &ut at the same strike price
PA.OFF:
• +t St NF, % total &remium paidG 4 +t St N F, T total
premium paidG, there is no profit 4 no 8oss
• +t St ] F, % total &remium paidG, &rofit keeps on
decreasing with rise in St
• +t , ^ St ^ F, % total &remium paidG, 8oss keeps on
increasing with rise in St
• +t St N , , There is ma#imum loss R i.e total premium
paid
• +t , ^ St ^ F, T total &remium paidG, 8oss keeps on
reducing with rise in St
• +t St Y F, T total &remium paidG, &rofit keeps on
increasing with rise in St
Risk3 8imited, but should not really be viewed as a low risk strategy because you are paying
out for two options which are both wasting assets
Re9ar$3 :nlimited
WEN TO 2%E3 ?ou believe that the stock*inde# is about to make a large move in either
direction. + good time to utilize straddles is where there has been a prolonged period of
e#treme 'uietness Fin pricesG and implied volatility is around multiyear lows. If this is the
case look to do longer dated months rather than the shorter ones
'OLAT/L/T. EDPECTAT/ON3 6ery bullish. 6olatility increases improve the position
substantially. 6olatility should therefore be monitored closely.
PROF/T3 :nlimited for an increase or decrease in the underlying
LO%%: 8imited to the premium paid in establishing the position. 8oss will be greatest if the
underlying is at the initiated strike at e#piry.
)REAKE'EN3 .eached if the underlying rises or falls from option strikes by the same
amount as the premium cost of establishing the position.
T/ME DECA.3 -urts a lot, remember you have double time erosion because of the two
options bought. Decay depends a lot on volatility if volatility increases time decay will
decrease etc.
5urrent &rice of the Stock NSoN @;B
Strike &rice of 5all (ptionN,cN @@2
&remium of 5all (ption N,cN .s. /;.;0
Strike &rice of &ut (ptionN,pN @@2
&remium of 5all (ption N,pN .s. 1;.10
N.R.INSTITUTE OF BUSINESS MANAGEMENT
PA.#OFF TA)LE
St
&remium
for ,c
>ain *
8oss on
,c
&remium
for ,p
>ain *
8oss on
,p
Total
>ain*8oss
@/2 /;.;0 %/;.;0 1;.10 10.A0 //.9
@// /;.;0 %/;.;0 1;.10 1;.A0 /2.9
@/1 /;.;0 %/;.;0 1;.10 19.A0 =.9
@/9 /;.;0 %/;.;0 1;.10 11.A0 B.9
@/; /;.;0 %/;.;0 1;.10 1/.A0 A.9
@/0 /;.;0 %/;.;0 1;.10 12.A0 @.9
@/@ /;.;0 %/;.;0 1;.10 /=.A0 0.9
@/A /;.;0 %/;.;0 1;.10 /B.A0 ;.9
@/B /;.;0 %/;.;0 1;.10 /A.A0 9.9
@/= /;.;0 %/;.;0 1;.10 /@.A0 1.9
@12 /;.;0 %/;.;0 1;.10 /0.A0 /.9
@1/ /;.;0 %/;.;0 1;.10 /;.A0 2.9
@11 /;.;0 %/;.;0 1;.10 /9.A0 %2.A
@19 /;.;0 %/;.;0 1;.10 /1.A0 %/.A
@1; /;.;0 %/;.;0 1;.10 //.A0 %1.A
@10 /;.;0 %/;.;0 1;.10 /2.A0 %9.A
@1@ /;.;0 %/;.;0 1;.10 =.A0 %;.A
@1A /;.;0 %/;.;0 1;.10 B.A0 %0.A
@1B /;.;0 %/;.;0 1;.10 A.A0 %@.A
@1= /;.;0 %/;.;0 1;.10 @.A0 %A.A
@92 /;.;0 %/;.;0 1;.10 0.A0 %B.A
@9/ /;.;0 %/;.;0 1;.10 ;.A0 %=.A
@91 /;.;0 %/;.;0 1;.10 9.A0 %/2.A
@99 /;.;0 %/;.;0 1;.10 1.A0 %//.A
@9; /;.;0 %/;.;0 1;.10 /.A0 %/1.A
@90 /;.;0 %/;.;0 1;.10 2.A0 %/9.A
@9@ /;.;0 %/;.;0 1;.10 %2.10 %/;.A
@9A /;.;0 %/;.;0 1;.10 %/.10 %/0.A
@9B /;.;0 %/;.;0 1;.10 %1.10 %/@.A
@9= /;.;0 %/;.;0 1;.10 %9.10 %/A.A
@;2 /;.;0 %/;.;0 1;.10 %;.10 %/B.A
@;/ /;.;0 %/;.;0 1;.10 %0.10 %/=.A
@;1 /;.;0 %/;.;0 1;.10 %@.10 %12.A
@;9 /;.;0 %/;.;0 1;.10 %A.10 %1/.A
@;; /;.;0 %/;.;0 1;.10 %B.10 %11.A
@;0 /;.;0 %/;.;0 1;.10 %=.10 %19.A
@;@ /;.;0 %/;.;0 1;.10 %/2.10 %1;.A
@;A /;.;0 %/;.;0 1;.10 %//.10 %10.A
@;B /;.;0 %/;.;0 1;.10 %/1.10 %[email protected]
@;= /;.;0 %/;.;0 1;.10 %/9.10 %1A.A
@02 /;.;0 %/;.;0 1;.10 %/;.10 %1B.A
@0/ /;.;0 %/;.;0 1;.10 %/0.10 %1=.A
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@01 /;.;0 %/;.;0 1;.10 %/@.10 %92.A
@09 /;.;0 %/;.;0 1;.10 %/A.10 %9/.A
@0; /;.;0 %/;.;0 1;.10 %/B.10 %91.A
@00 /;.;0 %/;.;0 1;.10 %/=.10 %99.A
@0@ /;.;0 %/;.;0 1;.10 %12.10 %9;.A
@0A /;.;0 %/;.;0 1;.10 %1/.10 %90.A
@0B /;.;0 %/;.;0 1;.10 %11.10 %[email protected]
@0= /;.;0 %/;.;0 1;.10 %19.10 %9A.A
@@2 /;.;0 %/;.;0 1;.10 %1;.10 %9B.A
@@/ /;.;0 %/9.;0 1;.10 %1;.10 %9A.A
@@1 /;.;0 %/1.;0 1;.10 %1;.10 %[email protected]
@@9 /;.;0 %//.;0 1;.10 %1;.10 %90.A
@@; /;.;0 %/2.;0 1;.10 %1;.10 %9;.A
@@0 /;.;0 %=.;0 1;.10 %1;.10 %99.A
@@@ /;.;0 %B.;0 1;.10 %1;.10 %91.A
@@A /;.;0 %A.;0 1;.10 %1;.10 %9/.A
@@B /;.;0 %@.;0 1;.10 %1;.10 %92.A
@@= /;.;0 %0.;0 1;.10 %1;.10 %1=.A
@A2 /;.;0 %;.;0 1;.10 %1;.10 %1B.A
@A/ /;.;0 %9.;0 1;.10 %1;.10 %1A.A
@A1 /;.;0 %1.;0 1;.10 %1;.10 %[email protected]
@A9 /;.;0 %/.;0 1;.10 %1;.10 %10.A
@A; /;.;0 %2.;0 1;.10 %1;.10 %1;.A
@A0 /;.;0 2.00 1;.10 %1;.10 %19.A
@A@ /;.;0 /.00 1;.10 %1;.10 %11.A
@AA /;.;0 1.00 1;.10 %1;.10 %1/.A
@AB /;.;0 9.00 1;.10 %1;.10 %12.A
@A= /;.;0 ;.00 1;.10 %1;.10 %/=.A
@B2 /;.;0 0.00 1;.10 %1;.10 %/B.A
@B/ /;.;0 @.00 1;.10 %1;.10 %/A.A
@B1 /;.;0 A.00 1;.10 %1;.10 %/@.A
@B9 /;.;0 B.00 1;.10 %1;.10 %/0.A
@B; /;.;0 =.00 1;.10 %1;.10 %/;.A
@B0 /;.;0 /2.00 1;.10 %1;.10 %/9.A
@B@ /;.;0 //.00 1;.10 %1;.10 %/1.A
@BA /;.;0 /1.00 1;.10 %1;.10 %//.A
@BB /;.;0 /9.00 1;.10 %1;.10 %/2.A
@B= /;.;0 /;.00 1;.10 %1;.10 %=.A
@=2 /;.;0 /0.00 1;.10 %1;.10 %B.A
@=/ /;.;0 /@.00 1;.10 %1;.10 %A.A
@=1 /;.;0 /A.00 1;.10 %1;.10 %@.A
@=9 /;.;0 /B.00 1;.10 %1;.10 %0.A
@=; /;.;0 /=.00 1;.10 %1;.10 %;.A
@=0 /;.;0 12.00 1;.10 %1;.10 %9.A
@=@ /;.;0 1/.00 1;.10 %1;.10 %1.A
@=A /;.;0 11.00 1;.10 %1;.10 %/.A
@=B /;.;0 19.00 1;.10 %1;.10 %2.A
@== /;.;0 1;.00 1;.10 %1;.10 2.9
A22 /;.;0 10.00 1;.10 %1;.10 /.9
A2/ /;.;0 [email protected] 1;.10 %1;.10 1.9
N.R.INSTITUTE OF BUSINESS MANAGEMENT
A21 /;.;0 1A.00 1;.10 %1;.10 9.9
A29 /;.;0 1B.00 1;.10 %1;.10 ;.9
A2; /;.;0 1=.00 1;.10 %1;.10 0.9
A20 /;.;0 92.00 1;.10 %1;.10 @.9
A2@ /;.;0 9/.00 1;.10 %1;.10 A.9
A2A /;.;0 91.00 1;.10 %1;.10 B.9
A2B /;.;0 99.00 1;.10 %1;.10 =.9
A2= /;.;0 9;.00 1;.10 %1;.10 /2.9
A/2 /;.;0 90.00 1;.10 %1;.10 //.9
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&;, Lon- stran-le
DE%CR/PT/ON3 % 8ong on / 5all at a high Strike &rice ,1 4 / &ut at the 8ower strike price
,/
PA.OFF:
• +t St NF,/ % total &remium paidG 4 +t St N F,1 T total
premium paidG, there is no profit 4 no 8oss
• +t St ] F,/ % total &remium paidG, &rofit keeps on
decreasing with rise in St
• +t ,/ ^ St ^ F,/ % total &remium paidG, 8oss keeps on
increasing with rise in St
• +t ,1 ^ St ^ ,/ , Thereis fi#ed loss R i.e total premium
paid
• +t ,1 ^ St ^ F,1 T total &remium paidG, 8oss keeps on
reducing with rise in St
• +t St Y F,1 T total &remium paidG, &rofit keeps on
increasing with rise in St
Risk: 8imited
Re9ar$: :nlimited
The Tra$e3 !uying out%of%the%money calls and puts
WEN TO 2%E: ?ou believe the stock*inde# will have an e#plosive move either up or down.
This strategy is similar to the buy straddle but the premium paid is less but then a larger
move is needed to show a profit.
'OLAT/L/T. EDPECTAT/ON3 6ery bullish, increases in volatility work marvels for the
position
PROF/T3 The profit potential is unlimited although a substantial directional movement is
necessary to yield a profit for both a rise and fall in the underlying.
LO%%3 (ccurs if the market is staticR limited to the premium paid in establishing the
position
)REAKE'EN3 (ccurs if the market rises above the higher strike price at ! by an amount
e'ual to the cost of establishing the position or if the market falls below the lower strike
price at + by the amount e'ual to the cost of establishing the position.
,
T/ME DECA.: This position is a big wasting asset. +s time passes, value of position erodes
toward e#piration value. If volatility increases, erosion slows, if volatility decreases, erosion
speeds up.
5urrent &rice of the Stock NSoN @;B
Strike &rice of 5all (ptionN,cN @@2
&remium of 5all (ption N,cN .s. /;.;0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
Strike &rice of &ut (ptionN,pN @;2
&remium of 5all (ption N,pN .s. //.=
PA.#OFF TA)LE
St
&remium
for ,c
>ain *
8oss on
,c
&remium
for ,p
>ain *
8oss on
,p
Total
>ain*8oss
@22 /;.;0 %/;.;0 //.= 1B./ /9.@0
@2/ /;.;0 %/;.;0 //.= 1A./ /1.@0
@21 /;.;0 %/;.;0 //.= 1@./ //.@0
@29 /;.;0 %/;.;0 //.= 10./ /2.@0
@2; /;.;0 %/;.;0 //.= 1;./ =.@0
@20 /;.;0 %/;.;0 //.= 19./ B.@0
@2@ /;.;0 %/;.;0 //.= 11./ A.@0
@2A /;.;0 %/;.;0 //.= 1/./ @.@0
@2B /;.;0 %/;.;0 //.= 12./ 0.@0
@2= /;.;0 %/;.;0 //.= /=./ ;.@0
@/2 /;.;0 %/;.;0 //.= /B./ 9.@0
@// /;.;0 %/;.;0 //.= /A./ 1.@0
@/1 /;.;0 %/;.;0 //.= /@./ /.@0
@/9 /;.;0 %/;.;0 //.= /0./ 2.@0
@/; /;.;0 %/;.;0 //.= /;./ %2.90
@/0 /;.;0 %/;.;0 //.= /9./ %/.90
@/@ /;.;0 %/;.;0 //.= /1./ %1.90
@/A /;.;0 %/;.;0 //.= //./ %9.90
@/B /;.;0 %/;.;0 //.= /2./ %;.90
@/= /;.;0 %/;.;0 //.= =./ %0.90
@12 /;.;0 %/;.;0 //.= B./ %@.90
@1/ /;.;0 %/;.;0 //.= A./ %A.90
@11 /;.;0 %/;.;0 //.= @./ %B.90
@19 /;.;0 %/;.;0 //.= 0./ %=.90
@1; /;.;0 %/;.;0 //.= ;./ %/2.90
@10 /;.;0 %/;.;0 //.= 9./ %//.90
@1@ /;.;0 %/;.;0 //.= 1./ %/1.90
@1A /;.;0 %/;.;0 //.= /./ %/9.90
@1B /;.;0 %/;.;0 //.= 2./ %/;.90
@1= /;.;0 %/;.;0 //.= %2.= %/0.90
@92 /;.;0 %/;.;0 //.= %/.= %/@.90
@9/ /;.;0 %/;.;0 //.= %1.= %/A.90
@91 /;.;0 %/;.;0 //.= %9.= %/B.90
@99 /;.;0 %/;.;0 //.= %;.= %/=.90
@9; /;.;0 %/;.;0 //.= %0.= %12.90
@90 /;.;0 %/;.;0 //.= %@.= %1/.90
@9@ /;.;0 %/;.;0 //.= %A.= %11.90
@9A /;.;0 %/;.;0 //.= %B.= %19.90
@9B /;.;0 %/;.;0 //.= %=.= %1;.90
@9= /;.;0 %/;.;0 //.= %/2.= %10.90
@;2 /;.;0 %/;.;0 //.= %//.= %[email protected]
@;/ /;.;0 %/;.;0 //.= %//.= %[email protected]
@;1 /;.;0 %/;.;0 //.= %//.= %[email protected]
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@;9 /;.;0 %/;.;0 //.= %//.= %[email protected]
@;; /;.;0 %/;.;0 //.= %//.= %[email protected]
@;0 /;.;0 %/;.;0 //.= %//.= %[email protected]
@;@ /;.;0 %/;.;0 //.= %//.= %[email protected]
@;A /;.;0 %/;.;0 //.= %//.= %[email protected]
@;B /;.;0 %/;.;0 //.= %//.= %[email protected]
@;= /;.;0 %/;.;0 //.= %//.= %[email protected]
@02 /;.;0 %/;.;0 //.= %//.= %[email protected]
@0/ /;.;0 %/;.;0 //.= %//.= %[email protected]
@01 /;.;0 %/;.;0 //.= %//.= %[email protected]
@09 /;.;0 %/;.;0 //.= %//.= %[email protected]
@0; /;.;0 %/;.;0 //.= %//.= %[email protected]
@00 /;.;0 %/;.;0 //.= %//.= %[email protected]
@0@ /;.;0 %/;.;0 //.= %//.= %[email protected]
@0A /;.;0 %/;.;0 //.= %//.= %[email protected]
@0B /;.;0 %/;.;0 //.= %//.= %[email protected]
@0= /;.;0 %/;.;0 //.= %//.= %[email protected]
@@2 /;.;0 %/;.;0 //.= %//.= %[email protected]
@@/ /;.;0 %/9.;0 //.= %//.= %10.90
@@1 /;.;0 %/1.;0 //.= %//.= %1;.90
@@9 /;.;0 %//.;0 //.= %//.= %19.90
@@; /;.;0 %/2.;0 //.= %//.= %11.90
@@0 /;.;0 %=.;0 //.= %//.= %1/.90
@@@ /;.;0 %B.;0 //.= %//.= %12.90
@@A /;.;0 %A.;0 //.= %//.= %/=.90
@@B /;.;0 %@.;0 //.= %//.= %/B.90
@@= /;.;0 %0.;0 //.= %//.= %/A.90
@A2 /;.;0 %;.;0 //.= %//.= %/@.90
@A/ /;.;0 %9.;0 //.= %//.= %/0.90
@A1 /;.;0 %1.;0 //.= %//.= %/;.90
@A9 /;.;0 %/.;0 //.= %//.= %/9.90
@A; /;.;0 %2.;0 //.= %//.= %/1.90
@A0 /;.;0 2.00 //.= %//.= %//.90
@A@ /;.;0 /.00 //.= %//.= %/2.90
@AA /;.;0 1.00 //.= %//.= %=.90
@AB /;.;0 9.00 //.= %//.= %B.90
@A= /;.;0 ;.00 //.= %//.= %A.90
@B2 /;.;0 0.00 //.= %//.= %@.90
@B/ /;.;0 @.00 //.= %//.= %0.90
@B1 /;.;0 A.00 //.= %//.= %;.90
@B9 /;.;0 B.00 //.= %//.= %9.90
@B; /;.;0 =.00 //.= %//.= %1.90
@B0 /;.;0 /2.00 //.= %//.= %/.90
@B@ /;.;0 //.00 //.= %//.= %2.90
@BA /;.;0 /1.00 //.= %//.= 2.@0
@BB /;.;0 /9.00 //.= %//.= /.@0
@B= /;.;0 /;.00 //.= %//.= 1.@0
@=2 /;.;0 /0.00 //.= %//.= 9.@0
@=/ /;.;0 /@.00 //.= %//.= ;.@0
@=1 /;.;0 /A.00 //.= %//.= 0.@0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@=9 /;.;0 /B.00 //.= %//.= @.@0
@=; /;.;0 /=.00 //.= %//.= A.@0
@=0 /;.;0 12.00 //.= %//.= B.@0
@=@ /;.;0 1/.00 //.= %//.= =.@0
@=A /;.;0 11.00 //.= %//.= /2.@0
@=B /;.;0 19.00 //.= %//.= //.@0
@== /;.;0 1;.00 //.= %//.= /1.@0
A22 /;.;0 10.00 //.= %//.= /9.@0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
TRAD/NG %TRATEG/E% 2%ED FOR OPPORT2N/%T/C
O2TLOOK
1, Con*ersion
DE%CR/PT/ON3 % 8ong on :nderlying, 8ong on &ut 4 short on 5all at the same Strike &rice
PA.OFF3 +t any St, there is ain *
8oss on
Stock
FSt % SoG
&remium
&aid
F & G
&rofit *
8oss on
&ut
&osition
&remium
.eceived
F 5 G
&rofit *
8oss on
5all
&osition
Total
&rofit *
8oss
@;2 %B 1;.10 %;.10 /;.;0 /;.;0 1.1
@;/ %A 1;.10 %0.10 /;.;0 /;.;0 1.1
@;1 %@ 1;.10 %@.10 /;.;0 /;.;0 1.1
@;9 %0 1;.10 %A.10 /;.;0 /;.;0 1.1
@;; %; 1;.10 %B.10 /;.;0 /;.;0 1.1
@;0 %9 1;.10 %=.10 /;.;0 /;.;0 1.1
@;@ %1 1;.10 %/2.10 /;.;0 /;.;0 1.1
@;A %/ 1;.10 %//.10 /;.;0 /;.;0 1.1
@;B 2 1;.10 %/1.10 /;.;0 /;.;0 1.1
@;= / 1;.10 %/9.10 /;.;0 /;.;0 1.1
@02 1 1;.10 %/;.10 /;.;0 /;.;0 1.1
@0/ 9 1;.10 %/0.10 /;.;0 /;.;0 1.1
@01 ; 1;.10 %/@.10 /;.;0 /;.;0 1.1
@09 0 1;.10 %/A.10 /;.;0 /;.;0 1.1
@0; @ 1;.10 %/B.10 /;.;0 /;.;0 1.1
@00 A 1;.10 %/=.10 /;.;0 /;.;0 1.1
@0@ B 1;.10 %12.10 /;.;0 /;.;0 1.1
@0A = 1;.10 %1/.10 /;.;0 /;.;0 1.1
@0B /2 1;.10 %11.10 /;.;0 /;.;0 1.1
@0= // 1;.10 %19.10 /;.;0 /;.;0 1.1
@@2 /1 1;.10 %1;.10 /;.;0 /;.;0 1.1
@@/ /9 1;.10 %1;.10 /;.;0 /9.;0 1.1
@@1 /; 1;.10 %1;.10 /;.;0 /1.;0 1.1
@@9 /0 1;.10 %1;.10 /;.;0 //.;0 1.1
@@; /@ 1;.10 %1;.10 /;.;0 /2.;0 1.1
@@0 /A 1;.10 %1;.10 /;.;0 =.;0 1.1
@@@ /B 1;.10 %1;.10 /;.;0 B.;0 1.1
@@A /= 1;.10 %1;.10 /;.;0 A.;0 1.1
@@B 12 1;.10 %1;.10 /;.;0 @.;0 1.1
@@= 1/ 1;.10 %1;.10 /;.;0 0.;0 1.1
@A2 11 1;.10 %1;.10 /;.;0 ;.;0 1.1
@A/ 19 1;.10 %1;.10 /;.;0 9.;0 1.1
@A1 1; 1;.10 %1;.10 /;.;0 1.;0 1.1
@A9 10 1;.10 %1;.10 /;.;0 /.;0 1.1
@A; 1@ 1;.10 %1;.10 /;.;0 2.;0 1.1
@A0 1A 1;.10 %1;.10 /;.;0 %2.00 1.1
@A@ 1B 1;.10 %1;.10 /;.;0 %/.00 1.1
@AA 1= 1;.10 %1;.10 /;.;0 %1.00 1.1
@AB 92 1;.10 %1;.10 /;.;0 %9.00 1.1
@A= 9/ 1;.10 %1;.10 /;.;0 %;.00 1.1
@B2 91 1;.10 %1;.10 /;.;0 %0.00 1.1
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@B/ 99 1;.10 %1;.10 /;.;0 %@.00 1.1
@B1 9; 1;.10 %1;.10 /;.;0 %A.00 1.1
@B9 90 1;.10 %1;.10 /;.;0 %B.00 1.1
@B; 9@ 1;.10 %1;.10 /;.;0 %=.00 1.1
@B0 9A 1;.10 %1;.10 /;.;0 %/2.00 1.1
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&8, Re*ersal
DE%CR/PT/ON: # Short on :nderlying, Short on &ut 4 8ong on 5all at the same Strike &rice
PA.OFF: +t any St, there is ain *
8oss on
Stock
FSo % StG
&remium
.eceived
F & G
&rofit *
8oss on
&ut
&osition
&remium
&aid
F 5 G
&rofit *
8oss on
5all
&osition
Total
&rofit *
8oss
@10 92 1;.10 %/2.A0 /;.;0 %/;.;0 ;.B
@1@ 1= 1;.10 %=.A0 /;.;0 %/;.;0 ;.B
@1A 1B 1;.10 %B.A0 /;.;0 %/;.;0 ;.B
@1B 1A 1;.10 %A.A0 /;.;0 %/;.;0 ;.B
@1= 1@ 1;.10 %@.A0 /;.;0 %/;.;0 ;.B
@92 10 1;.10 %0.A0 /;.;0 %/;.;0 ;.B
@9/ 1; 1;.10 %;.A0 /;.;0 %/;.;0 ;.B
@91 19 1;.10 %9.A0 /;.;0 %/;.;0 ;.B
@99 11 1;.10 %1.A0 /;.;0 %/;.;0 ;.B
@9; 1/ 1;.10 %/.A0 /;.;0 %/;.;0 ;.B
@90 12 1;.10 %2.A0 /;.;0 %/;.;0 ;.B
@9@ /= 1;.10 2.10 /;.;0 %/;.;0 ;.B
@9A /B 1;.10 /.10 /;.;0 %/;.;0 ;.B
@9B /A 1;.10 1.10 /;.;0 %/;.;0 ;.B
@9= /@ 1;.10 9.10 /;.;0 %/;.;0 ;.B
@;2 /0 1;.10 ;.10 /;.;0 %/;.;0 ;.B
@;/ /; 1;.10 0.10 /;.;0 %/;.;0 ;.B
@;1 /9 1;.10 @.10 /;.;0 %/;.;0 ;.B
@;9 /1 1;.10 A.10 /;.;0 %/;.;0 ;.B
@;; // 1;.10 B.10 /;.;0 %/;.;0 ;.B
@;0 /2 1;.10 =.10 /;.;0 %/;.;0 ;.B
@;@ = 1;.10 /2.10 /;.;0 %/;.;0 ;.B
@;A B 1;.10 //.10 /;.;0 %/;.;0 ;.B
@;B A 1;.10 /1.10 /;.;0 %/;.;0 ;.B
@;= @ 1;.10 /9.10 /;.;0 %/;.;0 ;.B
@02 0 1;.10 /;.10 /;.;0 %/;.;0 ;.B
@0/ ; 1;.10 /0.10 /;.;0 %/;.;0 ;.B
@01 9 1;.10 /@.10 /;.;0 %/;.;0 ;.B
@09 1 1;.10 /A.10 /;.;0 %/;.;0 ;.B
@0; / 1;.10 /B.10 /;.;0 %/;.;0 ;.B
@00 2 1;.10 /=.10 /;.;0 %/;.;0 ;.B
@0@ %/ 1;.10 12.10 /;.;0 %/;.;0 ;.B
@0A %1 1;.10 1/.10 /;.;0 %/;.;0 ;.B
@0B %9 1;.10 11.10 /;.;0 %/;.;0 ;.B
@0= %; 1;.10 19.10 /;.;0 %/;.;0 ;.B
@@2 %0 1;.10 1;.10 /;.;0 %/;.;0 ;.B
@@/ %@ 1;.10 1;.10 /;.;0 %/9.;0 ;.B
@@1 %A 1;.10 1;.10 /;.;0 %/1.;0 ;.B
@@9 %B 1;.10 1;.10 /;.;0 %//.;0 ;.B
@@; %= 1;.10 1;.10 /;.;0 %/2.;0 ;.B
@@0 %/2 1;.10 1;.10 /;.;0 %=.;0 ;.B
@@@ %// 1;.10 1;.10 /;.;0 %B.;0 ;.B
@@A %/1 1;.10 1;.10 /;.;0 %A.;0 ;.B
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@@B %/9 1;.10 1;.10 /;.;0 %@.;0 ;.B
@@= %/; 1;.10 1;.10 /;.;0 %0.;0 ;.B
@A2 %/0 1;.10 1;.10 /;.;0 %;.;0 ;.B
@A/ %/@ 1;.10 1;.10 /;.;0 %9.;0 ;.B
@A1 %/A 1;.10 1;.10 /;.;0 %1.;0 ;.B
@A9 %/B 1;.10 1;.10 /;.;0 %/.;0 ;.B
@A; %/= 1;.10 1;.10 /;.;0 %2.;0 ;.B
@A0 %12 1;.10 1;.10 /;.;0 2.00 ;.B
@A@ %1/ 1;.10 1;.10 /;.;0 /.00 ;.B
@AA %11 1;.10 1;.10 /;.;0 1.00 ;.B
@AB %19 1;.10 1;.10 /;.;0 9.00 ;.B
@A= %1; 1;.10 1;.10 /;.;0 ;.00 ;.B
@B2 %10 1;.10 1;.10 /;.;0 0.00 ;.B
@B/ %1@ 1;.10 1;.10 /;.;0 @.00 ;.B
@B1 %1A 1;.10 1;.10 /;.;0 A.00 ;.B
@B9 %1B 1;.10 1;.10 /;.;0 B.00 ;.B
@B; %1= 1;.10 1;.10 /;.;0 =.00 ;.B
@B0 %92 1;.10 1;.10 /;.;0 /2.00 ;.B
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&>, Lon- )oA
DE%CR/PT/ON: # 8ong on 5all 4 Short on &ut at a low Strike &rice ,/, 4 8ong on &ut 4
short on 5all at a -igh Strike &rice ,1
PA.OFF: +t any St, There is fi#ed profit of "et &remium .eceived
When to 2se3 % When u have a !earish (utlook
Market eA"ectation3 Direction neutral*volatility neutral. This is a Mlocked tradeM, 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 e#ploited.
Profit an$ loss characteristics at eA"ir63
If the pricing differential can be e#ploited, a profit will occur, the e#tent of the mis%pricing
translating into the level of profit realized. The !o# is regularly used by traders to close out
positions near e#piry.
>enerally traded at par FzeroG for options on futures, and at the net cost of carry for inde#
and e'uity options. 5an be problematic if all positions are not closed out at e#actly the same
time.
5urrent &rice of the Stock NSoN @;B
Strike &rice of 5all (ptionN,c/N @12
&remium of 5all (ptionNc/N.s. 9;.@0
Strike &rice of &ut (ptionN,p/N @12
&remium of &ut (ptionN&/N .s. A.B0
Strike &rice of 5all (ptionN,c1N @B2
&remium of 5all (ptionN51N.s. @.=0
Strike &rice of &ut (ption N,p1N @B2
&remium of &ut (ption N&1N .s. [email protected]
N.R.INSTITUTE OF BUSINESS MANAGEMENT
PA.#OFF TA)LE
St
&remium
for ,c/
>ain *
8oss on
,c/
&remium
for ,p/
>ain *
8oss on
,p/
&remium
for ,c1
>ain *
8oss on
,c1
&remium
for ,p1
>ain *
8oss on
,p1
Total
>ain*8oss
@22 9;.@0 %9;.@0 A.B0 %/1./0 @.=0 @.=0 [email protected] ;9.0 9.@0
@2/ 9;.@0 %9;.@0 A.B0 %//./0 @.=0 @.=0 [email protected] ;1.0 9.@0
@21 9;.@0 %9;.@0 A.B0 %/2./0 @.=0 @.=0 [email protected] ;/.0 9.@0
@29 9;.@0 %9;.@0 A.B0 %=./0 @.=0 @.=0 [email protected] ;2.0 9.@0
@2; 9;.@0 %9;.@0 A.B0 %B./0 @.=0 @.=0 [email protected] 9=.0 9.@0
@20 9;.@0 %9;.@0 A.B0 %A./0 @.=0 @.=0 [email protected] 9B.0 9.@0
@2@ 9;.@0 %9;.@0 A.B0 %@./0 @.=0 @.=0 [email protected] 9A.0 9.@0
@2A 9;.@0 %9;.@0 A.B0 %0./0 @.=0 @.=0 [email protected] [email protected] 9.@0
@2B 9;.@0 %9;.@0 A.B0 %;./0 @.=0 @.=0 [email protected] 90.0 9.@0
@2= 9;.@0 %9;.@0 A.B0 %9./0 @.=0 @.=0 [email protected] 9;.0 9.@0
@/2 9;.@0 %9;.@0 A.B0 %1./0 @.=0 @.=0 [email protected] 99.0 9.@0
@// 9;.@0 %9;.@0 A.B0 %/./0 @.=0 @.=0 [email protected] 91.0 9.@0
@/1 9;.@0 %9;.@0 A.B0 %2./0 @.=0 @.=0 [email protected] 9/.0 9.@0
@/9 9;.@0 %9;.@0 A.B0 2.B0 @.=0 @.=0 [email protected] 92.0 9.@0
@/; 9;.@0 %9;.@0 A.B0 /.B0 @.=0 @.=0 [email protected] 1=.0 9.@0
@/0 9;.@0 %9;.@0 A.B0 1.B0 @.=0 @.=0 [email protected] 1B.0 9.@0
@/@ 9;.@0 %9;.@0 A.B0 9.B0 @.=0 @.=0 [email protected] 1A.0 9.@0
@/A 9;.@0 %9;.@0 A.B0 ;.B0 @.=0 @.=0 [email protected] [email protected] 9.@0
@/B 9;.@0 %9;.@0 A.B0 0.B0 @.=0 @.=0 [email protected] 10.0 9.@0
@/= 9;.@0 %9;.@0 A.B0 @.B0 @.=0 @.=0 [email protected] 1;.0 9.@0
@12 9;.@0 %9;.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 19.0 9.@0
@1/ 9;.@0 %99.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 11.0 9.@0
@11 9;.@0 %91.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 1/.0 9.@0
@19 9;.@0 %9/.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 12.0 9.@0
@1; 9;.@0 %92.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /=.0 9.@0
@10 9;.@0 %1=.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /B.0 9.@0
@1@ 9;.@0 %1B.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /A.0 9.@0
@1A 9;.@0 %1A.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /@.0 9.@0
@1B 9;.@0 %1@.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /0.0 9.@0
@1= 9;.@0 %10.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /;.0 9.@0
@92 9;.@0 %1;.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /9.0 9.@0
@9/ 9;.@0 %19.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /1.0 9.@0
@91 9;.@0 %11.@0 A.B0 A.B0 @.=0 @.=0 [email protected] //.0 9.@0
@99 9;.@0 %1/.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /2.0 9.@0
@9; 9;.@0 %12.@0 A.B0 A.B0 @.=0 @.=0 [email protected] =.0 9.@0
@90 9;.@0 %/=.@0 A.B0 A.B0 @.=0 @.=0 [email protected] B.0 9.@0
@9@ 9;.@0 %/B.@0 A.B0 A.B0 @.=0 @.=0 [email protected] A.0 9.@0
@9A 9;.@0 %/A.@0 A.B0 A.B0 @.=0 @.=0 [email protected] @.0 9.@0
@9B 9;.@0 %/@.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 0.0 9.@0
@9= 9;.@0 %/0.@0 A.B0 A.B0 @.=0 @.=0 [email protected] ;.0 9.@0
@;2 9;.@0 %/;.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 9.0 9.@0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@;/ 9;.@0 %/9.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 1.0 9.@0
@;1 9;.@0 %/1.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /.0 9.@0
@;9 9;.@0 %//.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 2.0 9.@0
@;; 9;.@0 %/2.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %2.0 9.@0
@;0 9;.@0 %=.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %/.0 9.@0
@;@ 9;.@0 %B.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %1.0 9.@0
@;A 9;.@0 %A.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %9.0 9.@0
@;B 9;.@0 %@.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %;.0 9.@0
@;= 9;.@0 %0.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %0.0 9.@0
@02 9;.@0 %;.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %@.0 9.@0
@0/ 9;.@0 %9.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %A.0 9.@0
@01 9;.@0 %1.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %B.0 9.@0
@09 9;.@0 %/.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %=.0 9.@0
@0; 9;.@0 %2.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %/2.0 9.@0
@00 9;.@0 2.90 A.B0 A.B0 @.=0 @.=0 [email protected] %//.0 9.@0
@0@ 9;.@0 /.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/1.0 9.@0
@0A 9;.@0 1.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/9.0 9.@0
@0B 9;.@0 9.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/;.0 9.@0
@0= 9;.@0 ;.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/0.0 9.@0
@@2 9;.@0 0.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/@.0 9.@0
@@/ 9;.@0 @.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/A.0 9.@0
@@1 9;.@0 A.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/B.0 9.@0
@@9 9;.@0 B.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/=.0 9.@0
@@; 9;.@0 =.90 A.B0 A.B0 @.=0 @.=0 [email protected] %12.0 9.@0
@@0 9;.@0 /2.90 A.B0 A.B0 @.=0 @.=0 [email protected] %1/.0 9.@0
@@@ 9;.@0 //.90 A.B0 A.B0 @.=0 @.=0 [email protected] %11.0 9.@0
@@A 9;.@0 /1.90 A.B0 A.B0 @.=0 @.=0 [email protected] %19.0 9.@0
@@B 9;.@0 /9.90 A.B0 A.B0 @.=0 @.=0 [email protected] %1;.0 9.@0
@@= 9;.@0 /;.90 A.B0 A.B0 @.=0 @.=0 [email protected] %10.0 9.@0
@A2 9;.@0 /0.90 A.B0 A.B0 @.=0 @.=0 [email protected] %[email protected] 9.@0
@A/ 9;.@0 /@.90 A.B0 A.B0 @.=0 @.=0 [email protected] %1A.0 9.@0
@A1 9;.@0 /A.90 A.B0 A.B0 @.=0 @.=0 [email protected] %1B.0 9.@0
@A9 9;.@0 /B.90 A.B0 A.B0 @.=0 @.=0 [email protected] %1=.0 9.@0
@A; 9;.@0 /=.90 A.B0 A.B0 @.=0 @.=0 [email protected] %92.0 9.@0
@A0 9;.@0 12.90 A.B0 A.B0 @.=0 @.=0 [email protected] %9/.0 9.@0
@A@ 9;.@0 1/.90 A.B0 A.B0 @.=0 @.=0 [email protected] %91.0 9.@0
@AA 9;.@0 11.90 A.B0 A.B0 @.=0 @.=0 [email protected] %99.0 9.@0
@AB 9;.@0 19.90 A.B0 A.B0 @.=0 @.=0 [email protected] %9;.0 9.@0
@A= 9;.@0 1;.90 A.B0 A.B0 @.=0 @.=0 [email protected] %90.0 9.@0
@B2 9;.@0 10.90 A.B0 A.B0 @.=0 @.=0 [email protected] %[email protected] 9.@0
@B/ 9;.@0 [email protected] A.B0 A.B0 @.=0 0.=0 [email protected] %[email protected] 9.@0
@B1 9;.@0 1A.90 A.B0 A.B0 @.=0 ;.=0 [email protected] %[email protected] 9.@0
@B9 9;.@0 1B.90 A.B0 A.B0 @.=0 9.=0 [email protected] %[email protected] 9.@0
@B; 9;.@0 1=.90 A.B0 A.B0 @.=0 1.=0 [email protected] %[email protected] 9.@0
@B0 9;.@0 92.90 A.B0 A.B0 @.=0 /.=0 [email protected] %[email protected] 9.@0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
F/ND/NG%:
F/G (pen Interest 4 &ut*5all .atio are the most important indicators
which help to determine the trend of "ifty for the ne#t trading day.
F1G &ut*5all .atio can be calculated on the basis of3
FaG (pen Interest
FbG 6olume
uts
FbG 8ong Straddle
FcG Short 5ondor
.ange !ound FaG Double Top
FbG 5hristmas Trees
N.R.INSTITUTE OF BUSINESS MANAGEMENT
FAG !y practicing such type of trading strategy, one can earn unlimited
profits if the market turns in favorable zone 4 if the market moves
other way round, loss e#posure is limited to a certain e#tent.
FBG !y practicing such trading strategies, an investor can predict his
ma#imum loss in advance which is not the case if he trades without
framing such trading strategies.
F=G There are certain (pportunistic trading strategy in the market in
which one can earn fi#ed amount of profit, irrespective of the
market movement, such type of Trading strategies are known as
+rbitrage Trading strategies which are not readily available but one
has to grab such opportunities from the market from the price
movements.
N.R.INSTITUTE OF BUSINESS MANAGEMENT
CONCL2%/ON:
There are many indicators which can be used while trading in
derivative market but widely used 4 more effective are open interest 4
put call ratio. Investors can study both together 4 can arrive at
meaningful trend. These indicators can also be ointly used with
technical analysis indicators to find out profitable buying 4 selling
points.
Trading strategy can be framed by individual taking several
considerations like view for the market%bullish, bearish or uncertain,
type of trader%hedger, speculator or arbitrageur, risk appetite, period of
investment, type of analysis%fundamental or technical analysis etc.!ut
important thing is to minimize loss 4 take the right opportunity. "ow a
day markets are very volatile, so it is in the interest of investors to
frame volatile market strategies as stated above rather than to have
one view. Investors should have constant look on the market to
e#ecute opportunistic strategies which gives fi# amount of profit
irrespective of market fluctuations. Investors rather than keeping one
view bullish or bearish its better to have volatile market strategy with
limited loss and limited profits.
N.R.INSTITUTE OF BUSINESS MANAGEMENT
!!8O*RAP65
BOOKS:
? OPTIONS AND FUTURES –IN INDIAN PERSPECTIE
? D. C. PATWARI
? OPTIONS! FUTURES AND OTHER DERIATIES
? JOHN C. HULL
? TECHNICAL ANALYSIS OF FUTURES MAR"ET
? JOHN MURPHY
? FUTURES AND OPTIONS
? N.D. OHRA # B.R. BAGRI
WEB SITES:
www.sebi.com
www.bseindia.com
www.nseindia.com
www.derivativesindia.com
www.hathwaysecurities.com
www.moneycontrol.com
www.arcadiastock.com
www.anagram.com
%OFTWARE:
• 5+&IT+8I") ")(
• (DI)" DI)T (< "S)
N.R.INSTITUTE OF BUSINESS MANAGEMENT
*8OSSAR5
A5erican#st6le O"tion3 +n option contract that may be e#ercised at any
time between the date of purchase and the e#piration date.
At#the#5one6: (ption whose e#ercise price is the same as the market price
of the underlying asset.
)ear: Someone who thinks market prices will decline.
)!ll: Someone who thinks market prices will rise.
Call: +n option contract granting the purchaser the right to buy the
underlying instruments at the agreed strike price. + call obliges the seller to
sell the underlying instrument at the agreed strike price, if the option is
assigned to him.
Cash settle5ent: Settlement of a contract by payment or receipt of a
settlement amount instead of the physical delivery of the underlying asset.
Closin-: 5onducting a transaction, which offsets the original trade and
li'uidates an e#isting position.
Contract !nit: The number of units of the underlying instrument on which
the contract bears, i.e. contract size. This may vary according to the
underlying on which the contract bears.
E!ro"ean#st6le o"tions: +n option that can be e#ercised by the buyer only
on the contract e#piration date.
EAercise: + decision, reserved for the option holder, to re'uest e#ecution of
the contract.
EA"iration $ate: The date on which the option contract e#pires.
e$-e: + conservative strategy used to limit investment loss by effecting a
transaction, which offsets an e#isting position.
ol$er: The party who purchased an option.
N.R.INSTITUTE OF BUSINESS MANAGEMENT
/n#the#5one6: + call is said to be Hin%the%moneyH when the value of the
underlying instrument is greater than the option strike price. + put is Hin%
the%moneyH when its strike price is greater than the value of the underlying
instrument.
/ntrinsic *al!e: The intrinsic value of an option is the difference between
the actual price of the underlying security and the strike price of the option.
The intrinsic value of an option reflects the effective financial advantage that
would result from the immediate e#ercise of that option.
LiB!i$it6: $arket situation in which 'uick purchase or sale of a security is
possible without causing substantial changes in prices.
Lon- "osition: +n investor7s position where the number of contracts bought
e#ceeds the number of contracts sold. -e is a net holder.
Lot si3e: "umber of contract you want to buy or sell
Maintenance Mar-in: + set minimum margin that a customer must
maintain in his margin account.
Mark#To#Market: 6aluation of a financial instrument according to the
current trading value FpriceG on the e#change.
O"en interest: The number of outstanding option contracts in the e#change
market or in a particular class or series.
O"tion: + contract that conveys the right, but not the obligation, to buy or
sell a particular item at a certain price for a limited time. (nly the seller of
the option is obligated to perform.
O!t#of#the#5one6: + call is Hout%of%the%moneyH when the value of the
underlying instrument is less than the option strike price. + put is Hout%of%
the%moneyH when its strike price is less than the value of the underlying
instrument.
Pre5i!5: The price of an optionIthe sum of money that the option buyer
pays and the option seller receives for the rights granted by the option.
P!t: +n option contract granting the purchaser the right to sell the
underlying instruments at the agreed strike price. + put obliges the seller to
N.R.INSTITUTE OF BUSINESS MANAGEMENT
purchase the underlying instrument at the agreed strike price, if the option
is assigned to him.
%hort "osition: +n investor7s position where the number of contracts sold
e#ceeds the number of contracts bought. The person is a net seller.
%"ot Price: .efers to the underlying current market price.
%trike "rice or eAercise "rice: The price at which the option holder may
purchase Fin case of callG or sell Fin case of putG the underlying instrument.
Ti5e *al!e: It is determined by the remaining lifespan of the option, the
volatility and the cost of refinancing the underlying asset Finterest ratesG.
Time value N option price % intrinsic value
2n$erl6in- asset4 !n$erl6in- instr!5ent: The instrument Fshares,
bonds, stock inde#[G that can be purchased Fin case of callG or sold Fin case
of a putG by a buyer who e#ercises his option.
'olatilit6: It is a measure for the fluctuation range of the underlying price.
The greater the volatility, the higher the option price.
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
doc_730859104.doc
One of the interesting developments in financial markets over the last 15 to 20 years has been the growing popularity of derivatives or contingent claims. In many situations, both hedgers and speculators find it more attractive to trade a derivative on an asset than to trade the asset itself.
A
Project
On
Study of Nifty Derivatives
&
Risk Minimization Trading Strategy
IN PARTIAL FULFILMENT FOR THE REQUIREMT OF THE PROJECT
STUDY COURSE OF TWO YEAR (FULL TIME) M.B.A. PROGRAMME
N.R. nstitute of !usiness Management
!atc" #$%%&'$%(%
Su)mitted )y# *uided )y#
Ankit S"a" +%&%,(- Prof. Anja.i /"oksi
As"is" As"ara +%&%%0-
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N. R. nstitute of !usiness Management
CERTIFICATE FROM INSTITUTE
This is to certify that Mr. Ankit Shah and Mr.
Ashish Ashara, students of MBA (2008-10 batch) at N.R.
nstitute of Business Mana!e"ent, #u$arat %ni&ersity,
Ah"edabad ha&e 're'ared a #rand (ro$ect on “Study of
Nifty Derivatives Risk Mini!i"ation Tradin#
Strate#ies$ in 'artia) fu)*))"ent of t+o years fu))-ti"e
MBA (ro!ra" of #u$arat %ni&ersity. This 'ro$ect +or, has
been underta,en under the !uidance of %rof. An&a'i
Choksi, core facu)ty at N.R. nstitute of Business
Mana!e"ent, #u$arat %ni&ersity, Ah"edabad.
This is a)so to ascertain that this 'ro$ect has been
're'ared on)y for the a+ard of MBA de!ree and has not
been sub"itted for any other 'ur'ose.
Dr. Hitesth Ruparel Prof. Anjali
Choksi
N.R.INSTITUTE OF BUSINESS MANAGEMENT
Director Core faculty
_________________ _________________
Date: 20/03/200
Place: Ah!e"a#a"
N.R.INSTITUTE OF BUSINESS MANAGEMENT
PREFACE
Derivatives occupy a very significant place in the field of finance and are
virtually driving the global financial markets of the day. Several markets of
the world have witnessed a phenomenal rise in trading derivative
instruments over a past three decades.
With the world embracing the derivatives trading on a large scale, the Indian
market obviously cannot remain aloof, especially after liberalization has been
set in motion.
Derivatives are like a deep ocean of knowledge for the learners of finance.
The reason to choose this subect was the emergence of derivatives trading
in the different sectors of the Indian economy. Derivatives are the means to
achieve the obectives like risk management by fund managers and hedging
by traders. !y looking at the importance of the derivatives we make an
attempt to determine the trend of "ifty and on the basis of that framing
trading strategies to minimize the risk while ma#imize the profit e#posure.
This proect would be a powerful base for us to undergo further studies in
the risk management field and even in the field of finance as a whole.
N.R.INSTITUTE OF BUSINESS MANAGEMENT
ACKNOWLEDGEMENT
$oti vati on and co%operati on are the mai n two pi ll ars on whi ch the
success of any proect rel i es. So fi rst of all we woul d li ke to thank
core facul ty and our proect gui de &rof . Anjali Choksi who made
us aware about the proect and moti vated us to work on the
gui del i nes of this uni 'ue, new and knowl edge based proect. She
has gui ded us at each and every stage of the proect. She has
been enthusi astical l y i nvol ved i n every aspects of the proect.
(veral l we are highl y i ndebted to her for al l the knowl edge,
gui dance and moti vati on that she has provi ded us throughout our
proect.
We would al so l i ke to thank our fri ends and those who have
hel ped us duri ng this proect di rectl y or i ndi rectl y.
)very person wants to prove himsel f i n this fast, dynami c and cut%
throat competi ti ve worl d. When he*she gets an opportuni ty to do
so then he or she wi l l fi nd that success is very near to hi m*her.
So, we would li ke to acknowl edge our thanks to our Director
Prof. itesh R!"arel who gave us opportuni ty to prove
oursel ves. We al so woul d l i ke to e#press our grati tude to our
proect Co#or$inator Mr.%!nil c.%hah &'ice#"resi$ent Arca$ia
%hares ( stock )rokers "*t lt$ ( Mr. Kal"esh $.%hah
&)!siness Associate# Arca$ia shares ( stock +rokers P*t
lt$, an$ the Mana-er of Arca$ia %hares ( stock +rokers P*t
Lt$. for thei r ki nd support and assi stance.
+",IT S-+-
+S-IS- +S-+.+
N.R.INSTITUTE OF BUSINESS MANAGEMENT
121/3T41 S3MMAR5
(ne of the interesting developments in financial markets over the last /0 to
12 years has been the growing popularity of derivatives or contingent
claims. In many situations, both hedgers and speculators find it more
attractive to trade a derivative on an asset than to trade the asset itself.
Some derivatives are traded on e#changes. (thers are made available to
corporate clients by financial institutions or added to new issues of securities
by underwriters.
In this report we have included history of Derivatives. Than we have
included Derivatives $arket in India. Than after we have included stock
market Derivatives.
In this report we have taken a first look at forward, futures and options
contracts. + forward or futures contract involves an obligation to buy or sell
an asset at a certain time in the future for a certain price. There are two
types of options3 calls and puts. + call option gives the holder the right to
buy an asset by a certain date for a certain price. In India the derivatives
market has grown very rapidly. There are mainly three types of traders3
hedgers, speculators and arbitrageurs.
In the ne#t section, we have tried to determine the study of "ifty derivatives
for the short term period using the two important indicators namely (pen
Interest 4 &ut*5all .atio. In which &ut*5all .atio analysis proves to be more
effective indicators. $oreover in the analysis of &ut*5all .atio, 5ombination
of (pen Interest 4 6olume gives more accurate results.
In the last section, we have determined different trading strategies for
different market views i.e. !ullish, !earish, .ange bound 4 6olatile. (n the
basis of investors7 perceptions they can use suited strategies which will
minimize the loss. There are also some arbitrage strategies prevailing in the
market like reversal, conversion etc. which give fi# amount of profit
irrespective of market movements but it is not readily available in the
market but one has to grab such (pportunities.
&8+5)3 +-$)D+!+D
N.R.INSTITUTE OF BUSINESS MANAGEMENT
D+T) 3 12*29*12/2
INDEX
%r.
no To"ics
P-.
no.
/
I"T.(D:5TI(" T( I"DI+" 5+&IT+8 $+.,)T
/
1 I"T.(D:5TI(" T( D).I6+TI6)S
;
9
D)6)8(&$)"T (< D).I6+TI6)S $+.,)T I"
I"DI+
=
;
.)S)+.5- $)T-(D(8(>?
/1
0
ST(5, $+.,)T D).I6+TI6)S
/0
@ I"T.(D:5TI(" T( I" 3
? O"en /nterest
? P!t0Call Ratio
CbD.IS, $I"I$IE+TI(" T.+DI"> ST.+T)>I)S :SI">
ain *
8oss on
,p1
Total
>ain*8oss
@22 A.B0 %/1./0 //.= 1B./ /0.=0
@2/ A.B0 %//./0 //.= 1A./ /0.=0
@21 A.B0 %/2./0 //.= 1@./ /0.=0
@29 A.B0 %=./0 //.= 10./ /0.=0
@2; A.B0 %B./0 //.= 1;./ /0.=0
@20 A.B0 %A./0 //.= 19./ /0.=0
@2@ A.B0 %@./0 //.= 11./ /0.=0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&>, Co*ere$ P!t Writin-
DE%CR/PT/ON3 % Short &osition in the underlying 4 Short &osition on &ut at a low Strike
&rice
PA.OFF:
• +t St N So T &remium .eceived, there is no profit , "o 8oss
• +t StX , or St N ,, &rofit is fi#edR i,e >ain on :nderlying T*% >ain * 8oss on (ption
&osition
• +t St Y ,, &rofit on :nderlying is Increased by the amount of &remium !ut only
upto FSo T &remium .eceivedG, after that there is loss
WEN TO 2%E: # When the Trader is !earish
5urrent &rice of the Stock N @;B
Strike &rice N , N @;2
&remium of &ut (ption N .s.//.=
PA.#OFF TA)LE
&rice of
Stock on
)#piry Day
F St G
>ain *
8oss on
Stock
FSo % StG
&remium
.eceived
F 5 G
&rofit *
8oss on
(ption
&osition
Total
&rofit *
8oss
@10 19 //.= %9./ /=.=
@1B 12 //.= %2./ /=.=
@92 /B //.= /.= /=.=
@90 /9 //.= @.= /=.=
@9B /2 //.= =.= /=.=
@;2 B //.= //.= /=.=
@;1 @ //.= //.= /A.=
@;0 9 //.= //.= /;.=
@;B 2 //.= //.= //.=
@01 %; //.= //.= A.=
@0B %/2 //.= //.= /.=
@@2 %/1 //.= //.= %2./
@@0 %/A //.= //.= %0./
@A2 %11 //.= //.= %/2./
@A0 %1A //.= //.= %/0./
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&?, Protecti*e Call )!6in-
DE%CR/PT/ON3 % Short on :nderlying 4 8ong on 5all for a -igher Strike &riceV
PA.OFF:
• +t St N So % &remium &aid, there is no &rofit no 8oss
• +t St NSo or St Y ,, 8oss is ain *
8oss on
Stock
FSo % StG
&remium
&aid
F 5 G
&rofit *
8oss on
(ption
&osition
Total
&rofit *
8oss
@12 1B /;.;0 %/;.;0 /9.00
@10 19 /;.;0 %/;.;0 B.00
@1B 12 /;.;0 %/;.;0 0.00
@99 /0 /;.;0 %/;.;0 2.00
@9B /2 /;.;0 %/;.;0 %;.;0
@;1 @ /;.;0 %/;.;0 %B.;0
@;0 9 /;.;0 %/;.;0 %//.;0
@;B 2 /;.;0 %/;.;0 %/;.;0
@01 %; /;.;0 %/;.;0 %/B.;0
@00 %A /;.;0 %/;.;0 %1/.;0
@@2 %/1 /;.;0 %/;.;0 %1@.;0
@@0 %/A /;.;0 %=.;0 %1@.;0
@@B %12 /;.;0 %@.;0 %1@.;0
@A1 %1; /;.;0 %1.;0 %1@.;0
@A0 %1A /;.;0 2.00 %1@.;0
@B2 %91 /;.;0 0.00 %1@.;0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&;, Re*erse Collar %trate-6
DE%CR/PT/ON3 % Short on :nderlying, 8ong on 5all at higher &rice 4 Short on &ut at a low
price.
PA.OFF:
• +t St N So
% &remium
&aid, there
is no profit
no loss
• +t St ] ,p,
&ofit is
fi#ed
• +t St ^ ,c ,
8oss is
fi#ed
When to 2se3 % When u have a bearish (utlook
5urrent &rice of the Stock N @;B
Strike &rice of &ut (ption N @;2
&remium of &ut (ption N .s.//.=
Strike &rice of 5all (ption N @@2
&remium of 5all (ption N/;.;0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
PA.#OFF TA)LE
&rice of
Stock on
)#piry Day
F St G
>ain *
8oss on
Stock
FSo % StG
&remium
&aid
F 5 G
&rofit *
8oss on
5all
&osition
&remium
.eceived
F & G
&rofit *
8oss on
&ut
&osition
Total
&rofit *
8oss
@10 19 /;.;0 %/;.;0 //.= %9./ 0.;0
@92 /B /;.;0 %/;.;0 //.= /.= 0.;0
@90 /9 /;.;0 %/;.;0 //.= @.= 0.;0
@;2 B /;.;0 %/;.;0 //.= //.= 0.;0
@;1 @ /;.;0 %/;.;0 //.= //.= 9.;0
@;0 9 /;.;0 %/;.;0 //.= //.= 2.;0
@;B 2 /;.;0 %/;.;0 //.= //.= %1.00
@01 %; /;.;0 %/;.;0 //.= //.= %@.00
@00 %A /;.;0 %/;.;0 //.= //.= %=.00
@0B %/2 /;.;0 %/;.;0 //.= //.= %/1.00
@@2 %/1 /;.;0 %/;.;0 //.= //.= %/;.00
@@9 %/0 /;.;0 %//.;0 //.= //.= %/;.00
@@B %12 /;.;0 %@.;0 //.= //.= %/;.00
@A1 %1; /;.;0 %1.;0 //.= //.= %/;.00
@A0 %1A /;.;0 2.00 //.= //.= %/;.00
@B2 %91 /;.;0 0.00 //.= //.= %/;.00
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&ain *
8oss on
,p/
&remium
for ,c1
>ain * 8oss
on ,c1
&remium
for ,p1
>ain * 8oss
on ,p1
&remium
for ,c9
>ain *
8oss on
,c9
Total
>ain*8oss
@/0 19.B %[email protected] /;.;0 %/;.;0 1;.10 12.A0 /9.= /9.= %@
@/@ 19.B %1;.1 /;.;0 %/;.;0 1;.10 /=.A0 /9.= /9.= %0
@/A 19.B %11.1 /;.;0 %/;.;0 1;.10 /B.A0 /9.= /9.= %;
@/B 19.B %12.1 /;.;0 %/;.;0 1;.10 /A.A0 /9.= /9.= %9
@/= 19.B %/B.1 /;.;0 %/;.;0 1;.10 /@.A0 /9.= /9.= %1
@12 19.B %/@.1 /;.;0 %/;.;0 1;.10 /0.A0 /9.= /9.= %/
@1/ 19.B %/;.1 /;.;0 %/;.;0 1;.10 /;.A0 /9.= /9.= 2
@11 19.B %/1.1 /;.;0 %/;.;0 1;.10 /9.A0 /9.= /9.= /
@19 19.B %/2.1 /;.;0 %/;.;0 1;.10 /1.A0 /9.= /9.= 1
@1; 19.B %B.1 /;.;0 %/;.;0 1;.10 //.A0 /9.= /9.= 9
@10 19.B %@.1 /;.;0 %/;.;0 1;.10 /2.A0 /9.= /9.= ;
@1@ 19.B %;.1 /;.;0 %/;.;0 1;.10 =.A0 /9.= /9.= 0
@1A 19.B %1.1 /;.;0 %/;.;0 1;.10 B.A0 /9.= /9.= @
@1B 19.B %2.1 /;.;0 %/;.;0 1;.10 A.A0 /9.= /9.= A
@1= 19.B /.B /;.;0 %/;.;0 1;.10 @.A0 /9.= /9.= B
@92 19.B 9.B /;.;0 %/;.;0 1;.10 0.A0 /9.= /9.= =
@9/ 19.B 0.B /;.;0 %/;.;0 1;.10 ;.A0 /9.= /9.= /2
@91 19.B A.B /;.;0 %/;.;0 1;.10 9.A0 /9.= /9.= //
@99 19.B =.B /;.;0 %/;.;0 1;.10 1.A0 /9.= /9.= /1
@9; 19.B //.B /;.;0 %/;.;0 1;.10 /.A0 /9.= /9.= /9
@90 19.B /9.B /;.;0 %/;.;0 1;.10 2.A0 /9.= /9.= /;
@9@ 19.B /0.B /;.;0 %/;.;0 1;.10 %2.10 /9.= /9.= /0
@9A 19.B /A.B /;.;0 %/;.;0 1;.10 %/.10 /9.= /9.= /@
@9B 19.B /=.B /;.;0 %/;.;0 1;.10 %1.10 /9.= /9.= /A
@9= 19.B 1/.B /;.;0 %/;.;0 1;.10 %9.10 /9.= /9.= /B
@;2 19.B 19.B /;.;0 %/;.;0 1;.10 %;.10 /9.= /9.= /=
@;/ 19.B 19.B /;.;0 %/;.;0 1;.10 %0.10 /9.= /9.= /B
@;1 19.B 19.B /;.;0 %/;.;0 1;.10 %@.10 /9.= /9.= /A
@;9 19.B 19.B /;.;0 %/;.;0 1;.10 %A.10 /9.= /9.= /@
@;; 19.B 19.B /;.;0 %/;.;0 1;.10 %B.10 /9.= /9.= /0
@;0 19.B 19.B /;.;0 %/;.;0 1;.10 %=.10 /9.= /9.= /;
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@;@ 19.B 19.B /;.;0 %/;.;0 1;.10 %/2.10 /9.= /9.= /9
@;A 19.B 19.B /;.;0 %/;.;0 1;.10 %//.10 /9.= /9.= /1
@;B 19.B 19.B /;.;0 %/;.;0 1;.10 %/1.10 /9.= /9.= //
@;= 19.B 19.B /;.;0 %/;.;0 1;.10 %/9.10 /9.= /9.= /2
@02 19.B 19.B /;.;0 %/;.;0 1;.10 %/;.10 /9.= /9.= =
@0/ 19.B 19.B /;.;0 %/;.;0 1;.10 %/0.10 /9.= /9.= B
@01 19.B 19.B /;.;0 %/;.;0 1;.10 %/@.10 /9.= /9.= A
@09 19.B 19.B /;.;0 %/;.;0 1;.10 %/A.10 /9.= /9.= @
@0; 19.B 19.B /;.;0 %/;.;0 1;.10 %/B.10 /9.= /9.= 0
@00 19.B 19.B /;.;0 %/;.;0 1;.10 %/=.10 /9.= /9.= ;
@0@ 19.B 19.B /;.;0 %/;.;0 1;.10 %12.10 /9.= /9.= 9
@0A 19.B 19.B /;.;0 %/;.;0 1;.10 %1/.10 /9.= /9.= 1
@0B 19.B 19.B /;.;0 %/;.;0 1;.10 %11.10 /9.= /9.= /
@0= 19.B 19.B /;.;0 %/;.;0 1;.10 %19.10 /9.= /9.= 2
@@2 19.B 19.B /;.;0 %/;.;0 1;.10 %1;.10 /9.= /9.= %/
@@/ 19.B 19.B /;.;0 %/9.;0 1;.10 %1;.10 /9.= /9.= 2
@@1 19.B 19.B /;.;0 %/1.;0 1;.10 %1;.10 /9.= /9.= /
@@9 19.B 19.B /;.;0 %//.;0 1;.10 %1;.10 /9.= /9.= 1
@@; 19.B 19.B /;.;0 %/2.;0 1;.10 %1;.10 /9.= /9.= 9
@@0 19.B 19.B /;.;0 %=.;0 1;.10 %1;.10 /9.= /9.= ;
@@@ 19.B 19.B /;.;0 %B.;0 1;.10 %1;.10 /9.= /9.= 0
@@A 19.B 19.B /;.;0 %A.;0 1;.10 %1;.10 /9.= /9.= @
@@B 19.B 19.B /;.;0 %@.;0 1;.10 %1;.10 /9.= /9.= A
@@= 19.B 19.B /;.;0 %0.;0 1;.10 %1;.10 /9.= /9.= B
@A2 19.B 19.B /;.;0 %;.;0 1;.10 %1;.10 /9.= /9.= =
@A/ 19.B 19.B /;.;0 %9.;0 1;.10 %1;.10 /9.= /9.= /2
@A1 19.B 19.B /;.;0 %1.;0 1;.10 %1;.10 /9.= /9.= //
@A9 19.B 19.B /;.;0 %/.;0 1;.10 %1;.10 /9.= /9.= /1
@A; 19.B 19.B /;.;0 %2.;0 1;.10 %1;.10 /9.= /9.= /9
@A0 19.B 19.B /;.;0 2.00 1;.10 %1;.10 /9.= /9.= /;
@A@ 19.B 19.B /;.;0 /.00 1;.10 %1;.10 /9.= /9.= /0
@AA 19.B 19.B /;.;0 1.00 1;.10 %1;.10 /9.= /9.= /@
@AB 19.B 19.B /;.;0 9.00 1;.10 %1;.10 /9.= /9.= /A
@A= 19.B 19.B /;.;0 ;.00 1;.10 %1;.10 /9.= /9.= /B
@B2 19.B 19.B /;.;0 0.00 1;.10 %1;.10 /9.= /9.= /=
@B/ 19.B 19.B /;.;0 @.00 1;.10 %1;.10 /9.= //.= /B
@B1 19.B 19.B /;.;0 A.00 1;.10 %1;.10 /9.= =.= /A
@B9 19.B 19.B /;.;0 B.00 1;.10 %1;.10 /9.= A.= /@
@B; 19.B 19.B /;.;0 =.00 1;.10 %1;.10 /9.= 0.= /0
@B0 19.B 19.B /;.;0 /2.00 1;.10 %1;.10 /9.= 9.= /;
@B@ 19.B 19.B /;.;0 //.00 1;.10 %1;.10 /9.= /.= /9
@BA 19.B 19.B /;.;0 /1.00 1;.10 %1;.10 /9.= %2./ /1
@BB 19.B 19.B /;.;0 /9.00 1;.10 %1;.10 /9.= %1./ //
@B= 19.B 19.B /;.;0 /;.00 1;.10 %1;.10 /9.= %;./ /2
@=2 19.B 19.B /;.;0 /0.00 1;.10 %1;.10 /9.= %@./ =
@=/ 19.B 19.B /;.;0 /@.00 1;.10 %1;.10 /9.= %B./ B
@=1 19.B 19.B /;.;0 /A.00 1;.10 %1;.10 /9.= %/2./ A
@=9 19.B 19.B /;.;0 /B.00 1;.10 %1;.10 /9.= %/1./ @
@=; 19.B 19.B /;.;0 /=.00 1;.10 %1;.10 /9.= %/;./ 0
@=0 19.B 19.B /;.;0 12.00 1;.10 %1;.10 /9.= %/@./ ;
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@=@ 19.B 19.B /;.;0 1/.00 1;.10 %1;.10 /9.= %/B./ 9
@=A 19.B 19.B /;.;0 11.00 1;.10 %1;.10 /9.= %12./ 1
@=B 19.B 19.B /;.;0 19.00 1;.10 %1;.10 /9.= %11./ /
@== 19.B 19.B /;.;0 1;.00 1;.10 %1;.10 /9.= %1;./ 2
A22 19.B 19.B /;.;0 10.00 1;.10 %1;.10 /9.= %1@./ %/
A2/ 19.B 19.B /;.;0 [email protected] 1;.10 %1;.10 /9.= %1B./ %1
A21 19.B 19.B /;.;0 1A.00 1;.10 %1;.10 /9.= %92./ %9
A29 19.B 19.B /;.;0 1B.00 1;.10 %1;.10 /9.= %91./ %;
A2; 19.B 19.B /;.;0 1=.00 1;.10 %1;.10 /9.= %9;./ %0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&>, Christ5as Tree
DE%CR/PT/ON3 % 8ong on / 5all at low Strike &rice ,/, Short on / 5all at higher Strike
&rice ,1 4 Short / 5all at -igher Strike &rice ,9
PA.OFF:
• St ] ,c/, there is fi#ed profit of net premium .eceived
• +t ,c1 ^ St ^ ,c/, &rofit increases 8inearly with rise
in St
• +t ,c9 ^ St ^ ,c1, There is fi#ed &rofit of "et
&remium received T ,9% ,1
• +t St Y ,c9, &rofit reduces linearly with rise in St
WEN TO 2%E 3%
+ Trader is confident of a .ange !ound St, not too 6olatile
5urrent &rice of the Stock NSoN @;B
Strike &rice of 5all (ptionN,c/N @;2
&remium of 5all (ption N,/N .s. 12.1
Strike &rice of 5all (ptionN,c1N @@2
&remium of 5all (ption N,1N .s. /;.;0
Strike &rice of 5all (ptionN,c9N @B2
&remium of 5all (ption N,c9N .s. @.=0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
PA.#OFF TA)LE
St
&remium
for ,c/
>ain *
8oss on
,c/
&remium
for ,c1
>ain *
8oss on
,c1
&remium
for ,c9
>ain *
8oss on
,c9
Total
>ain*8oss
@90 12.1 %12.1 /;.;0 /;.;0 @.=0 @.=0 /.1
@9@ 12.1 %12.1 /;.;0 /;.;0 @.=0 @.=0 /.1
@9A 12.1 %12.1 /;.;0 /;.;0 @.=0 @.=0 /.1
@9B 12.1 %12.1 /;.;0 /;.;0 @.=0 @.=0 /.1
@9= 12.1 %12.1 /;.;0 /;.;0 @.=0 @.=0 /.1
@;2 12.1 %12.1 /;.;0 /;.;0 @.=0 @.=0 /.1
@;/ 12.1 %/=.1 /;.;0 /;.;0 @.=0 @.=0 1.1
@;1 12.1 %/B.1 /;.;0 /;.;0 @.=0 @.=0 9.1
@;9 12.1 %/A.1 /;.;0 /;.;0 @.=0 @.=0 ;.1
@;; 12.1 %/@.1 /;.;0 /;.;0 @.=0 @.=0 0.1
@;0 12.1 %/0.1 /;.;0 /;.;0 @.=0 @.=0 @.1
@;@ 12.1 %/;.1 /;.;0 /;.;0 @.=0 @.=0 A.1
@;A 12.1 %/9.1 /;.;0 /;.;0 @.=0 @.=0 B.1
@;B 12.1 %/1.1 /;.;0 /;.;0 @.=0 @.=0 =.1
@;= 12.1 %//.1 /;.;0 /;.;0 @.=0 @.=0 /2.1
@02 12.1 %/2.1 /;.;0 /;.;0 @.=0 @.=0 //.1
@0/ 12.1 %=.1 /;.;0 /;.;0 @.=0 @.=0 /1.1
@01 12.1 %B.1 /;.;0 /;.;0 @.=0 @.=0 /9.1
@09 12.1 %A.1 /;.;0 /;.;0 @.=0 @.=0 /;.1
@0; 12.1 %@.1 /;.;0 /;.;0 @.=0 @.=0 /0.1
@00 12.1 %0.1 /;.;0 /;.;0 @.=0 @.=0 /@.1
@0@ 12.1 %;.1 /;.;0 /;.;0 @.=0 @.=0 /A.1
@0A 12.1 %9.1 /;.;0 /;.;0 @.=0 @.=0 /B.1
@0B 12.1 %1.1 /;.;0 /;.;0 @.=0 @.=0 /=.1
@0= 12.1 %/.1 /;.;0 /;.;0 @.=0 @.=0 12.1
@@2 12.1 %2.1 /;.;0 /;.;0 @.=0 @.=0 1/.1
@@/ 12.1 2.B /;.;0 /9.;0 @.=0 @.=0 1/.1
@@1 12.1 /.B /;.;0 /1.;0 @.=0 @.=0 1/.1
@@9 12.1 1.B /;.;0 //.;0 @.=0 @.=0 1/.1
@@; 12.1 9.B /;.;0 /2.;0 @.=0 @.=0 1/.1
@@0 12.1 ;.B /;.;0 =.;0 @.=0 @.=0 1/.1
@@@ 12.1 0.B /;.;0 B.;0 @.=0 @.=0 1/.1
@@A 12.1 @.B /;.;0 A.;0 @.=0 @.=0 1/.1
@@B 12.1 A.B /;.;0 @.;0 @.=0 @.=0 1/.1
@@= 12.1 B.B /;.;0 0.;0 @.=0 @.=0 1/.1
@A2 12.1 =.B /;.;0 ;.;0 @.=0 @.=0 1/.1
@A/ 12.1 /2.B /;.;0 9.;0 @.=0 @.=0 1/.1
@A1 12.1 //.B /;.;0 1.;0 @.=0 @.=0 1/.1
@A9 12.1 /1.B /;.;0 /.;0 @.=0 @.=0 1/.1
@A; 12.1 /9.B /;.;0 2.;0 @.=0 @.=0 1/.1
@A0 12.1 /;.B /;.;0 %2.00 @.=0 @.=0 1/.1
@A@ 12.1 /0.B /;.;0 %/.00 @.=0 @.=0 1/.1
@AA 12.1 /@.B /;.;0 %1.00 @.=0 @.=0 1/.1
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@AB 12.1 /A.B /;.;0 %9.00 @.=0 @.=0 1/.1
@A= 12.1 /B.B /;.;0 %;.00 @.=0 @.=0 1/.1
@B2 12.1 /=.B /;.;0 %0.00 @.=0 @.=0 1/.1
@B/ 12.1 12.B /;.;0 %@.00 @.=0 0.=0 12.1
@B1 12.1 1/.B /;.;0 %A.00 @.=0 ;.=0 /=.1
@B9 12.1 11.B /;.;0 %B.00 @.=0 9.=0 /B.1
@B; 12.1 19.B /;.;0 %=.00 @.=0 1.=0 /A.1
@B0 12.1 1;.B /;.;0 %/2.00 @.=0 /.=0 /@.1
@B@ 12.1 10.B /;.;0 %//.00 @.=0 2.=0 /0.1
@BA 12.1 [email protected] /;.;0 %/1.00 @.=0 %2.20 /;.1
@BB 12.1 1A.B /;.;0 %/9.00 @.=0 %/.20 /9.1
@B= 12.1 1B.B /;.;0 %/;.00 @.=0 %1.20 /1.1
@=2 12.1 1=.B /;.;0 %/0.00 @.=0 %9.20 //.1
@=/ 12.1 92.B /;.;0 %/@.00 @.=0 %;.20 /2.1
@=1 12.1 9/.B /;.;0 %/A.00 @.=0 %0.20 =.1
@=9 12.1 91.B /;.;0 %/B.00 @.=0 %@.20 B.1
@=; 12.1 99.B /;.;0 %/=.00 @.=0 %A.20 A.1
@=0 12.1 9;.B /;.;0 %12.00 @.=0 %B.20 @.1
@=@ 12.1 90.B /;.;0 %1/.00 @.=0 %=.20 0.1
@=A 12.1 [email protected] /;.;0 %11.00 @.=0 %/2.20 ;.1
@=B 12.1 9A.B /;.;0 %19.00 @.=0 %//.20 9.1
@== 12.1 9B.B /;.;0 %1;.00 @.=0 %/1.20 1.1
A22 12.1 9=.B /;.;0 %10.00 @.=0 %/9.20 /.1
A2/ 12.1 ;2.B /;.;0 %[email protected] @.=0 %/;.20 2.1
A21 12.1 ;/.B /;.;0 %1A.00 @.=0 %/0.20 %2.B
A29 12.1 ;1.B /;.;0 %1B.00 @.=0 %/@.20 %/.B
A2; 12.1 ;9.B /;.;0 %1=.00 @.=0 %/A.20 %1.B
A20 12.1 ;;.B /;.;0 %92.00 @.=0 %/B.20 %9.B
A2@ 12.1 ;0.B /;.;0 %9/.00 @.=0 %/=.20 %;.B
A2A 12.1 ;@.B /;.;0 %91.00 @.=0 %12.20 %0.B
A2B 12.1 ;A.B /;.;0 %99.00 @.=0 %1/.20 %@.B
A2= 12.1 ;B.B /;.;0 %9;.00 @.=0 %11.20 %A.B
A/2 12.1 ;=.B /;.;0 %90.00 @.=0 %19.20 %B.B
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&?, Ratio %"rea$
DE%CR/PT/ON: # 8ong on / 5all with low Strike &rice 4 Short on 1 5alls at higher Strike
&rice
PA.OFF3
• +t St X ,/, There is ain *
8oss on
,c/
&remium
for ,c1
>ain *
8oss on
,c1
&remium
for ,c9
>ain *
8oss on
,c9
Total
>ain*8oss
@92 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@9/ 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@91 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@99 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@9; 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@90 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@9@ 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@9A 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@9B 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@9= 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@;2 12.1 %12.1 1B.= 1B.= @.=0 %@.=0 /.A0
@;/ 12.1 %/=.1 1B.= 1B.= @.=0 %@.=0 1.A0
@;1 12.1 %/B.1 1B.= 1B.= @.=0 %@.=0 9.A0
@;9 12.1 %/A.1 1B.= 1B.= @.=0 %@.=0 ;.A0
@;; 12.1 %/@.1 1B.= 1B.= @.=0 %@.=0 0.A0
@;0 12.1 %/0.1 1B.= 1B.= @.=0 %@.=0 @.A0
@;@ 12.1 %/;.1 1B.= 1B.= @.=0 %@.=0 A.A0
@;A 12.1 %/9.1 1B.= 1B.= @.=0 %@.=0 B.A0
@;B 12.1 %/1.1 1B.= 1B.= @.=0 %@.=0 =.A0
@;= 12.1 %//.1 1B.= 1B.= @.=0 %@.=0 /2.A0
@02 12.1 %/2.1 1B.= 1B.= @.=0 %@.=0 //.A0
@0/ 12.1 %=.1 1B.= 1B.= @.=0 %@.=0 /1.A0
@01 12.1 %B.1 1B.= 1B.= @.=0 %@.=0 /9.A0
@09 12.1 %A.1 1B.= 1B.= @.=0 %@.=0 /;.A0
@0; 12.1 %@.1 1B.= 1B.= @.=0 %@.=0 /0.A0
@00 12.1 %0.1 1B.= 1B.= @.=0 %@.=0 /@.A0
@0@ 12.1 %;.1 1B.= 1B.= @.=0 %@.=0 /A.A0
@0A 12.1 %9.1 1B.= 1B.= @.=0 %@.=0 /B.A0
@0B 12.1 %1.1 1B.= 1B.= @.=0 %@.=0 /=.A0
@0= 12.1 %/.1 1B.= 1B.= @.=0 %@.=0 12.A0
@@2 12.1 %2.1 1B.= 1B.= @.=0 %@.=0 1/.A0
@@/ 12.1 2.B 1B.= 1@.= @.=0 %@.=0 12.A0
@@1 12.1 /.B 1B.= 1;.= @.=0 %@.=0 /=.A0
@@9 12.1 1.B 1B.= 11.= @.=0 %@.=0 /B.A0
@@; 12.1 9.B 1B.= 12.= @.=0 %@.=0 /A.A0
@@0 12.1 ;.B 1B.= /B.= @.=0 %@.=0 /@.A0
@@@ 12.1 0.B 1B.= /@.= @.=0 %@.=0 /0.A0
@@A 12.1 @.B 1B.= /;.= @.=0 %@.=0 /;.A0
@@B 12.1 A.B 1B.= /1.= @.=0 %@.=0 /9.A0
@@= 12.1 B.B 1B.= /2.= @.=0 %@.=0 /1.A0
@A2 12.1 =.B 1B.= B.= @.=0 %@.=0 //.A0
@A/ 12.1 /2.B 1B.= @.= @.=0 %@.=0 /2.A0
@A1 12.1 //.B 1B.= ;.= @.=0 %@.=0 =.A0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@A9 12.1 /1.B 1B.= 1.= @.=0 %@.=0 B.A0
@A; 12.1 /9.B 1B.= 2.= @.=0 %@.=0 A.A0
@A0 12.1 /;.B 1B.= %/./ @.=0 %@.=0 @.A0
@A@ 12.1 /0.B 1B.= %9./ @.=0 %@.=0 0.A0
@AA 12.1 /@.B 1B.= %0./ @.=0 %@.=0 ;.A0
@AB 12.1 /A.B 1B.= %A./ @.=0 %@.=0 9.A0
@A= 12.1 /B.B 1B.= %=./ @.=0 %@.=0 1.A0
@B2 12.1 /=.B 1B.= %//./ @.=0 %@.=0 /.A0
@B/ 12.1 12.B 1B.= %/9./ @.=0 %0.=0 /.A0
@B1 12.1 1/.B 1B.= %/0./ @.=0 %;.=0 /.A0
@B9 12.1 11.B 1B.= %/A./ @.=0 %9.=0 /.A0
@B; 12.1 19.B 1B.= %/=./ @.=0 %1.=0 /.A0
@B0 12.1 1;.B 1B.= %1/./ @.=0 %/.=0 /.A0
@B@ 12.1 10.B 1B.= %19./ @.=0 %2.=0 /.A0
@BA 12.1 [email protected] 1B.= %10./ @.=0 2.20 /.A0
@BB 12.1 1A.B 1B.= %1A./ @.=0 /.20 /.A0
@B= 12.1 1B.B 1B.= %1=./ @.=0 1.20 /.A0
@=2 12.1 1=.B 1B.= %9/./ @.=0 9.20 /.A0
@=/ 12.1 92.B 1B.= %99./ @.=0 ;.20 /.A0
@=1 12.1 9/.B 1B.= %90./ @.=0 0.20 /.A0
@=9 12.1 91.B 1B.= %9A./ @.=0 @.20 /.A0
@=; 12.1 99.B 1B.= %9=./ @.=0 A.20 /.A0
@=0 12.1 9;.B 1B.= %;/./ @.=0 B.20 /.A0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&?, Lon- stra$$le
DE%CR/PT/ON3 % 8ong on / 5all 4 / &ut at the same strike price
PA.OFF:
• +t St NF, % total &remium paidG 4 +t St N F, T total
premium paidG, there is no profit 4 no 8oss
• +t St ] F, % total &remium paidG, &rofit keeps on
decreasing with rise in St
• +t , ^ St ^ F, % total &remium paidG, 8oss keeps on
increasing with rise in St
• +t St N , , There is ma#imum loss R i.e total premium
paid
• +t , ^ St ^ F, T total &remium paidG, 8oss keeps on
reducing with rise in St
• +t St Y F, T total &remium paidG, &rofit keeps on
increasing with rise in St
Risk3 8imited, but should not really be viewed as a low risk strategy because you are paying
out for two options which are both wasting assets
Re9ar$3 :nlimited
WEN TO 2%E3 ?ou believe that the stock*inde# is about to make a large move in either
direction. + good time to utilize straddles is where there has been a prolonged period of
e#treme 'uietness Fin pricesG and implied volatility is around multiyear lows. If this is the
case look to do longer dated months rather than the shorter ones
'OLAT/L/T. EDPECTAT/ON3 6ery bullish. 6olatility increases improve the position
substantially. 6olatility should therefore be monitored closely.
PROF/T3 :nlimited for an increase or decrease in the underlying
LO%%: 8imited to the premium paid in establishing the position. 8oss will be greatest if the
underlying is at the initiated strike at e#piry.
)REAKE'EN3 .eached if the underlying rises or falls from option strikes by the same
amount as the premium cost of establishing the position.
T/ME DECA.3 -urts a lot, remember you have double time erosion because of the two
options bought. Decay depends a lot on volatility if volatility increases time decay will
decrease etc.
5urrent &rice of the Stock NSoN @;B
Strike &rice of 5all (ptionN,cN @@2
&remium of 5all (ption N,cN .s. /;.;0
Strike &rice of &ut (ptionN,pN @@2
&remium of 5all (ption N,pN .s. 1;.10
N.R.INSTITUTE OF BUSINESS MANAGEMENT
PA.#OFF TA)LE
St
&remium
for ,c
>ain *
8oss on
,c
&remium
for ,p
>ain *
8oss on
,p
Total
>ain*8oss
@/2 /;.;0 %/;.;0 1;.10 10.A0 //.9
@// /;.;0 %/;.;0 1;.10 1;.A0 /2.9
@/1 /;.;0 %/;.;0 1;.10 19.A0 =.9
@/9 /;.;0 %/;.;0 1;.10 11.A0 B.9
@/; /;.;0 %/;.;0 1;.10 1/.A0 A.9
@/0 /;.;0 %/;.;0 1;.10 12.A0 @.9
@/@ /;.;0 %/;.;0 1;.10 /=.A0 0.9
@/A /;.;0 %/;.;0 1;.10 /B.A0 ;.9
@/B /;.;0 %/;.;0 1;.10 /A.A0 9.9
@/= /;.;0 %/;.;0 1;.10 /@.A0 1.9
@12 /;.;0 %/;.;0 1;.10 /0.A0 /.9
@1/ /;.;0 %/;.;0 1;.10 /;.A0 2.9
@11 /;.;0 %/;.;0 1;.10 /9.A0 %2.A
@19 /;.;0 %/;.;0 1;.10 /1.A0 %/.A
@1; /;.;0 %/;.;0 1;.10 //.A0 %1.A
@10 /;.;0 %/;.;0 1;.10 /2.A0 %9.A
@1@ /;.;0 %/;.;0 1;.10 =.A0 %;.A
@1A /;.;0 %/;.;0 1;.10 B.A0 %0.A
@1B /;.;0 %/;.;0 1;.10 A.A0 %@.A
@1= /;.;0 %/;.;0 1;.10 @.A0 %A.A
@92 /;.;0 %/;.;0 1;.10 0.A0 %B.A
@9/ /;.;0 %/;.;0 1;.10 ;.A0 %=.A
@91 /;.;0 %/;.;0 1;.10 9.A0 %/2.A
@99 /;.;0 %/;.;0 1;.10 1.A0 %//.A
@9; /;.;0 %/;.;0 1;.10 /.A0 %/1.A
@90 /;.;0 %/;.;0 1;.10 2.A0 %/9.A
@9@ /;.;0 %/;.;0 1;.10 %2.10 %/;.A
@9A /;.;0 %/;.;0 1;.10 %/.10 %/0.A
@9B /;.;0 %/;.;0 1;.10 %1.10 %/@.A
@9= /;.;0 %/;.;0 1;.10 %9.10 %/A.A
@;2 /;.;0 %/;.;0 1;.10 %;.10 %/B.A
@;/ /;.;0 %/;.;0 1;.10 %0.10 %/=.A
@;1 /;.;0 %/;.;0 1;.10 %@.10 %12.A
@;9 /;.;0 %/;.;0 1;.10 %A.10 %1/.A
@;; /;.;0 %/;.;0 1;.10 %B.10 %11.A
@;0 /;.;0 %/;.;0 1;.10 %=.10 %19.A
@;@ /;.;0 %/;.;0 1;.10 %/2.10 %1;.A
@;A /;.;0 %/;.;0 1;.10 %//.10 %10.A
@;B /;.;0 %/;.;0 1;.10 %/1.10 %[email protected]
@;= /;.;0 %/;.;0 1;.10 %/9.10 %1A.A
@02 /;.;0 %/;.;0 1;.10 %/;.10 %1B.A
@0/ /;.;0 %/;.;0 1;.10 %/0.10 %1=.A
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@01 /;.;0 %/;.;0 1;.10 %/@.10 %92.A
@09 /;.;0 %/;.;0 1;.10 %/A.10 %9/.A
@0; /;.;0 %/;.;0 1;.10 %/B.10 %91.A
@00 /;.;0 %/;.;0 1;.10 %/=.10 %99.A
@0@ /;.;0 %/;.;0 1;.10 %12.10 %9;.A
@0A /;.;0 %/;.;0 1;.10 %1/.10 %90.A
@0B /;.;0 %/;.;0 1;.10 %11.10 %[email protected]
@0= /;.;0 %/;.;0 1;.10 %19.10 %9A.A
@@2 /;.;0 %/;.;0 1;.10 %1;.10 %9B.A
@@/ /;.;0 %/9.;0 1;.10 %1;.10 %9A.A
@@1 /;.;0 %/1.;0 1;.10 %1;.10 %[email protected]
@@9 /;.;0 %//.;0 1;.10 %1;.10 %90.A
@@; /;.;0 %/2.;0 1;.10 %1;.10 %9;.A
@@0 /;.;0 %=.;0 1;.10 %1;.10 %99.A
@@@ /;.;0 %B.;0 1;.10 %1;.10 %91.A
@@A /;.;0 %A.;0 1;.10 %1;.10 %9/.A
@@B /;.;0 %@.;0 1;.10 %1;.10 %92.A
@@= /;.;0 %0.;0 1;.10 %1;.10 %1=.A
@A2 /;.;0 %;.;0 1;.10 %1;.10 %1B.A
@A/ /;.;0 %9.;0 1;.10 %1;.10 %1A.A
@A1 /;.;0 %1.;0 1;.10 %1;.10 %[email protected]
@A9 /;.;0 %/.;0 1;.10 %1;.10 %10.A
@A; /;.;0 %2.;0 1;.10 %1;.10 %1;.A
@A0 /;.;0 2.00 1;.10 %1;.10 %19.A
@A@ /;.;0 /.00 1;.10 %1;.10 %11.A
@AA /;.;0 1.00 1;.10 %1;.10 %1/.A
@AB /;.;0 9.00 1;.10 %1;.10 %12.A
@A= /;.;0 ;.00 1;.10 %1;.10 %/=.A
@B2 /;.;0 0.00 1;.10 %1;.10 %/B.A
@B/ /;.;0 @.00 1;.10 %1;.10 %/A.A
@B1 /;.;0 A.00 1;.10 %1;.10 %/@.A
@B9 /;.;0 B.00 1;.10 %1;.10 %/0.A
@B; /;.;0 =.00 1;.10 %1;.10 %/;.A
@B0 /;.;0 /2.00 1;.10 %1;.10 %/9.A
@B@ /;.;0 //.00 1;.10 %1;.10 %/1.A
@BA /;.;0 /1.00 1;.10 %1;.10 %//.A
@BB /;.;0 /9.00 1;.10 %1;.10 %/2.A
@B= /;.;0 /;.00 1;.10 %1;.10 %=.A
@=2 /;.;0 /0.00 1;.10 %1;.10 %B.A
@=/ /;.;0 /@.00 1;.10 %1;.10 %A.A
@=1 /;.;0 /A.00 1;.10 %1;.10 %@.A
@=9 /;.;0 /B.00 1;.10 %1;.10 %0.A
@=; /;.;0 /=.00 1;.10 %1;.10 %;.A
@=0 /;.;0 12.00 1;.10 %1;.10 %9.A
@=@ /;.;0 1/.00 1;.10 %1;.10 %1.A
@=A /;.;0 11.00 1;.10 %1;.10 %/.A
@=B /;.;0 19.00 1;.10 %1;.10 %2.A
@== /;.;0 1;.00 1;.10 %1;.10 2.9
A22 /;.;0 10.00 1;.10 %1;.10 /.9
A2/ /;.;0 [email protected] 1;.10 %1;.10 1.9
N.R.INSTITUTE OF BUSINESS MANAGEMENT
A21 /;.;0 1A.00 1;.10 %1;.10 9.9
A29 /;.;0 1B.00 1;.10 %1;.10 ;.9
A2; /;.;0 1=.00 1;.10 %1;.10 0.9
A20 /;.;0 92.00 1;.10 %1;.10 @.9
A2@ /;.;0 9/.00 1;.10 %1;.10 A.9
A2A /;.;0 91.00 1;.10 %1;.10 B.9
A2B /;.;0 99.00 1;.10 %1;.10 =.9
A2= /;.;0 9;.00 1;.10 %1;.10 /2.9
A/2 /;.;0 90.00 1;.10 %1;.10 //.9
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&;, Lon- stran-le
DE%CR/PT/ON3 % 8ong on / 5all at a high Strike &rice ,1 4 / &ut at the 8ower strike price
,/
PA.OFF:
• +t St NF,/ % total &remium paidG 4 +t St N F,1 T total
premium paidG, there is no profit 4 no 8oss
• +t St ] F,/ % total &remium paidG, &rofit keeps on
decreasing with rise in St
• +t ,/ ^ St ^ F,/ % total &remium paidG, 8oss keeps on
increasing with rise in St
• +t ,1 ^ St ^ ,/ , Thereis fi#ed loss R i.e total premium
paid
• +t ,1 ^ St ^ F,1 T total &remium paidG, 8oss keeps on
reducing with rise in St
• +t St Y F,1 T total &remium paidG, &rofit keeps on
increasing with rise in St
Risk: 8imited
Re9ar$: :nlimited
The Tra$e3 !uying out%of%the%money calls and puts
WEN TO 2%E: ?ou believe the stock*inde# will have an e#plosive move either up or down.
This strategy is similar to the buy straddle but the premium paid is less but then a larger
move is needed to show a profit.
'OLAT/L/T. EDPECTAT/ON3 6ery bullish, increases in volatility work marvels for the
position
PROF/T3 The profit potential is unlimited although a substantial directional movement is
necessary to yield a profit for both a rise and fall in the underlying.
LO%%3 (ccurs if the market is staticR limited to the premium paid in establishing the
position
)REAKE'EN3 (ccurs if the market rises above the higher strike price at ! by an amount
e'ual to the cost of establishing the position or if the market falls below the lower strike
price at + by the amount e'ual to the cost of establishing the position.
,
T/ME DECA.: This position is a big wasting asset. +s time passes, value of position erodes
toward e#piration value. If volatility increases, erosion slows, if volatility decreases, erosion
speeds up.
5urrent &rice of the Stock NSoN @;B
Strike &rice of 5all (ptionN,cN @@2
&remium of 5all (ption N,cN .s. /;.;0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
Strike &rice of &ut (ptionN,pN @;2
&remium of 5all (ption N,pN .s. //.=
PA.#OFF TA)LE
St
&remium
for ,c
>ain *
8oss on
,c
&remium
for ,p
>ain *
8oss on
,p
Total
>ain*8oss
@22 /;.;0 %/;.;0 //.= 1B./ /9.@0
@2/ /;.;0 %/;.;0 //.= 1A./ /1.@0
@21 /;.;0 %/;.;0 //.= 1@./ //.@0
@29 /;.;0 %/;.;0 //.= 10./ /2.@0
@2; /;.;0 %/;.;0 //.= 1;./ =.@0
@20 /;.;0 %/;.;0 //.= 19./ B.@0
@2@ /;.;0 %/;.;0 //.= 11./ A.@0
@2A /;.;0 %/;.;0 //.= 1/./ @.@0
@2B /;.;0 %/;.;0 //.= 12./ 0.@0
@2= /;.;0 %/;.;0 //.= /=./ ;.@0
@/2 /;.;0 %/;.;0 //.= /B./ 9.@0
@// /;.;0 %/;.;0 //.= /A./ 1.@0
@/1 /;.;0 %/;.;0 //.= /@./ /.@0
@/9 /;.;0 %/;.;0 //.= /0./ 2.@0
@/; /;.;0 %/;.;0 //.= /;./ %2.90
@/0 /;.;0 %/;.;0 //.= /9./ %/.90
@/@ /;.;0 %/;.;0 //.= /1./ %1.90
@/A /;.;0 %/;.;0 //.= //./ %9.90
@/B /;.;0 %/;.;0 //.= /2./ %;.90
@/= /;.;0 %/;.;0 //.= =./ %0.90
@12 /;.;0 %/;.;0 //.= B./ %@.90
@1/ /;.;0 %/;.;0 //.= A./ %A.90
@11 /;.;0 %/;.;0 //.= @./ %B.90
@19 /;.;0 %/;.;0 //.= 0./ %=.90
@1; /;.;0 %/;.;0 //.= ;./ %/2.90
@10 /;.;0 %/;.;0 //.= 9./ %//.90
@1@ /;.;0 %/;.;0 //.= 1./ %/1.90
@1A /;.;0 %/;.;0 //.= /./ %/9.90
@1B /;.;0 %/;.;0 //.= 2./ %/;.90
@1= /;.;0 %/;.;0 //.= %2.= %/0.90
@92 /;.;0 %/;.;0 //.= %/.= %/@.90
@9/ /;.;0 %/;.;0 //.= %1.= %/A.90
@91 /;.;0 %/;.;0 //.= %9.= %/B.90
@99 /;.;0 %/;.;0 //.= %;.= %/=.90
@9; /;.;0 %/;.;0 //.= %0.= %12.90
@90 /;.;0 %/;.;0 //.= %@.= %1/.90
@9@ /;.;0 %/;.;0 //.= %A.= %11.90
@9A /;.;0 %/;.;0 //.= %B.= %19.90
@9B /;.;0 %/;.;0 //.= %=.= %1;.90
@9= /;.;0 %/;.;0 //.= %/2.= %10.90
@;2 /;.;0 %/;.;0 //.= %//.= %[email protected]
@;/ /;.;0 %/;.;0 //.= %//.= %[email protected]
@;1 /;.;0 %/;.;0 //.= %//.= %[email protected]
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@;9 /;.;0 %/;.;0 //.= %//.= %[email protected]
@;; /;.;0 %/;.;0 //.= %//.= %[email protected]
@;0 /;.;0 %/;.;0 //.= %//.= %[email protected]
@;@ /;.;0 %/;.;0 //.= %//.= %[email protected]
@;A /;.;0 %/;.;0 //.= %//.= %[email protected]
@;B /;.;0 %/;.;0 //.= %//.= %[email protected]
@;= /;.;0 %/;.;0 //.= %//.= %[email protected]
@02 /;.;0 %/;.;0 //.= %//.= %[email protected]
@0/ /;.;0 %/;.;0 //.= %//.= %[email protected]
@01 /;.;0 %/;.;0 //.= %//.= %[email protected]
@09 /;.;0 %/;.;0 //.= %//.= %[email protected]
@0; /;.;0 %/;.;0 //.= %//.= %[email protected]
@00 /;.;0 %/;.;0 //.= %//.= %[email protected]
@0@ /;.;0 %/;.;0 //.= %//.= %[email protected]
@0A /;.;0 %/;.;0 //.= %//.= %[email protected]
@0B /;.;0 %/;.;0 //.= %//.= %[email protected]
@0= /;.;0 %/;.;0 //.= %//.= %[email protected]
@@2 /;.;0 %/;.;0 //.= %//.= %[email protected]
@@/ /;.;0 %/9.;0 //.= %//.= %10.90
@@1 /;.;0 %/1.;0 //.= %//.= %1;.90
@@9 /;.;0 %//.;0 //.= %//.= %19.90
@@; /;.;0 %/2.;0 //.= %//.= %11.90
@@0 /;.;0 %=.;0 //.= %//.= %1/.90
@@@ /;.;0 %B.;0 //.= %//.= %12.90
@@A /;.;0 %A.;0 //.= %//.= %/=.90
@@B /;.;0 %@.;0 //.= %//.= %/B.90
@@= /;.;0 %0.;0 //.= %//.= %/A.90
@A2 /;.;0 %;.;0 //.= %//.= %/@.90
@A/ /;.;0 %9.;0 //.= %//.= %/0.90
@A1 /;.;0 %1.;0 //.= %//.= %/;.90
@A9 /;.;0 %/.;0 //.= %//.= %/9.90
@A; /;.;0 %2.;0 //.= %//.= %/1.90
@A0 /;.;0 2.00 //.= %//.= %//.90
@A@ /;.;0 /.00 //.= %//.= %/2.90
@AA /;.;0 1.00 //.= %//.= %=.90
@AB /;.;0 9.00 //.= %//.= %B.90
@A= /;.;0 ;.00 //.= %//.= %A.90
@B2 /;.;0 0.00 //.= %//.= %@.90
@B/ /;.;0 @.00 //.= %//.= %0.90
@B1 /;.;0 A.00 //.= %//.= %;.90
@B9 /;.;0 B.00 //.= %//.= %9.90
@B; /;.;0 =.00 //.= %//.= %1.90
@B0 /;.;0 /2.00 //.= %//.= %/.90
@B@ /;.;0 //.00 //.= %//.= %2.90
@BA /;.;0 /1.00 //.= %//.= 2.@0
@BB /;.;0 /9.00 //.= %//.= /.@0
@B= /;.;0 /;.00 //.= %//.= 1.@0
@=2 /;.;0 /0.00 //.= %//.= 9.@0
@=/ /;.;0 /@.00 //.= %//.= ;.@0
@=1 /;.;0 /A.00 //.= %//.= 0.@0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@=9 /;.;0 /B.00 //.= %//.= @.@0
@=; /;.;0 /=.00 //.= %//.= A.@0
@=0 /;.;0 12.00 //.= %//.= B.@0
@=@ /;.;0 1/.00 //.= %//.= =.@0
@=A /;.;0 11.00 //.= %//.= /2.@0
@=B /;.;0 19.00 //.= %//.= //.@0
@== /;.;0 1;.00 //.= %//.= /1.@0
A22 /;.;0 10.00 //.= %//.= /9.@0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
TRAD/NG %TRATEG/E% 2%ED FOR OPPORT2N/%T/C
O2TLOOK
1, Con*ersion
DE%CR/PT/ON3 % 8ong on :nderlying, 8ong on &ut 4 short on 5all at the same Strike &rice
PA.OFF3 +t any St, there is ain *
8oss on
Stock
FSt % SoG
&remium
&aid
F & G
&rofit *
8oss on
&ut
&osition
&remium
.eceived
F 5 G
&rofit *
8oss on
5all
&osition
Total
&rofit *
8oss
@;2 %B 1;.10 %;.10 /;.;0 /;.;0 1.1
@;/ %A 1;.10 %0.10 /;.;0 /;.;0 1.1
@;1 %@ 1;.10 %@.10 /;.;0 /;.;0 1.1
@;9 %0 1;.10 %A.10 /;.;0 /;.;0 1.1
@;; %; 1;.10 %B.10 /;.;0 /;.;0 1.1
@;0 %9 1;.10 %=.10 /;.;0 /;.;0 1.1
@;@ %1 1;.10 %/2.10 /;.;0 /;.;0 1.1
@;A %/ 1;.10 %//.10 /;.;0 /;.;0 1.1
@;B 2 1;.10 %/1.10 /;.;0 /;.;0 1.1
@;= / 1;.10 %/9.10 /;.;0 /;.;0 1.1
@02 1 1;.10 %/;.10 /;.;0 /;.;0 1.1
@0/ 9 1;.10 %/0.10 /;.;0 /;.;0 1.1
@01 ; 1;.10 %/@.10 /;.;0 /;.;0 1.1
@09 0 1;.10 %/A.10 /;.;0 /;.;0 1.1
@0; @ 1;.10 %/B.10 /;.;0 /;.;0 1.1
@00 A 1;.10 %/=.10 /;.;0 /;.;0 1.1
@0@ B 1;.10 %12.10 /;.;0 /;.;0 1.1
@0A = 1;.10 %1/.10 /;.;0 /;.;0 1.1
@0B /2 1;.10 %11.10 /;.;0 /;.;0 1.1
@0= // 1;.10 %19.10 /;.;0 /;.;0 1.1
@@2 /1 1;.10 %1;.10 /;.;0 /;.;0 1.1
@@/ /9 1;.10 %1;.10 /;.;0 /9.;0 1.1
@@1 /; 1;.10 %1;.10 /;.;0 /1.;0 1.1
@@9 /0 1;.10 %1;.10 /;.;0 //.;0 1.1
@@; /@ 1;.10 %1;.10 /;.;0 /2.;0 1.1
@@0 /A 1;.10 %1;.10 /;.;0 =.;0 1.1
@@@ /B 1;.10 %1;.10 /;.;0 B.;0 1.1
@@A /= 1;.10 %1;.10 /;.;0 A.;0 1.1
@@B 12 1;.10 %1;.10 /;.;0 @.;0 1.1
@@= 1/ 1;.10 %1;.10 /;.;0 0.;0 1.1
@A2 11 1;.10 %1;.10 /;.;0 ;.;0 1.1
@A/ 19 1;.10 %1;.10 /;.;0 9.;0 1.1
@A1 1; 1;.10 %1;.10 /;.;0 1.;0 1.1
@A9 10 1;.10 %1;.10 /;.;0 /.;0 1.1
@A; 1@ 1;.10 %1;.10 /;.;0 2.;0 1.1
@A0 1A 1;.10 %1;.10 /;.;0 %2.00 1.1
@A@ 1B 1;.10 %1;.10 /;.;0 %/.00 1.1
@AA 1= 1;.10 %1;.10 /;.;0 %1.00 1.1
@AB 92 1;.10 %1;.10 /;.;0 %9.00 1.1
@A= 9/ 1;.10 %1;.10 /;.;0 %;.00 1.1
@B2 91 1;.10 %1;.10 /;.;0 %0.00 1.1
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@B/ 99 1;.10 %1;.10 /;.;0 %@.00 1.1
@B1 9; 1;.10 %1;.10 /;.;0 %A.00 1.1
@B9 90 1;.10 %1;.10 /;.;0 %B.00 1.1
@B; 9@ 1;.10 %1;.10 /;.;0 %=.00 1.1
@B0 9A 1;.10 %1;.10 /;.;0 %/2.00 1.1
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&8, Re*ersal
DE%CR/PT/ON: # Short on :nderlying, Short on &ut 4 8ong on 5all at the same Strike &rice
PA.OFF: +t any St, there is ain *
8oss on
Stock
FSo % StG
&remium
.eceived
F & G
&rofit *
8oss on
&ut
&osition
&remium
&aid
F 5 G
&rofit *
8oss on
5all
&osition
Total
&rofit *
8oss
@10 92 1;.10 %/2.A0 /;.;0 %/;.;0 ;.B
@1@ 1= 1;.10 %=.A0 /;.;0 %/;.;0 ;.B
@1A 1B 1;.10 %B.A0 /;.;0 %/;.;0 ;.B
@1B 1A 1;.10 %A.A0 /;.;0 %/;.;0 ;.B
@1= 1@ 1;.10 %@.A0 /;.;0 %/;.;0 ;.B
@92 10 1;.10 %0.A0 /;.;0 %/;.;0 ;.B
@9/ 1; 1;.10 %;.A0 /;.;0 %/;.;0 ;.B
@91 19 1;.10 %9.A0 /;.;0 %/;.;0 ;.B
@99 11 1;.10 %1.A0 /;.;0 %/;.;0 ;.B
@9; 1/ 1;.10 %/.A0 /;.;0 %/;.;0 ;.B
@90 12 1;.10 %2.A0 /;.;0 %/;.;0 ;.B
@9@ /= 1;.10 2.10 /;.;0 %/;.;0 ;.B
@9A /B 1;.10 /.10 /;.;0 %/;.;0 ;.B
@9B /A 1;.10 1.10 /;.;0 %/;.;0 ;.B
@9= /@ 1;.10 9.10 /;.;0 %/;.;0 ;.B
@;2 /0 1;.10 ;.10 /;.;0 %/;.;0 ;.B
@;/ /; 1;.10 0.10 /;.;0 %/;.;0 ;.B
@;1 /9 1;.10 @.10 /;.;0 %/;.;0 ;.B
@;9 /1 1;.10 A.10 /;.;0 %/;.;0 ;.B
@;; // 1;.10 B.10 /;.;0 %/;.;0 ;.B
@;0 /2 1;.10 =.10 /;.;0 %/;.;0 ;.B
@;@ = 1;.10 /2.10 /;.;0 %/;.;0 ;.B
@;A B 1;.10 //.10 /;.;0 %/;.;0 ;.B
@;B A 1;.10 /1.10 /;.;0 %/;.;0 ;.B
@;= @ 1;.10 /9.10 /;.;0 %/;.;0 ;.B
@02 0 1;.10 /;.10 /;.;0 %/;.;0 ;.B
@0/ ; 1;.10 /0.10 /;.;0 %/;.;0 ;.B
@01 9 1;.10 /@.10 /;.;0 %/;.;0 ;.B
@09 1 1;.10 /A.10 /;.;0 %/;.;0 ;.B
@0; / 1;.10 /B.10 /;.;0 %/;.;0 ;.B
@00 2 1;.10 /=.10 /;.;0 %/;.;0 ;.B
@0@ %/ 1;.10 12.10 /;.;0 %/;.;0 ;.B
@0A %1 1;.10 1/.10 /;.;0 %/;.;0 ;.B
@0B %9 1;.10 11.10 /;.;0 %/;.;0 ;.B
@0= %; 1;.10 19.10 /;.;0 %/;.;0 ;.B
@@2 %0 1;.10 1;.10 /;.;0 %/;.;0 ;.B
@@/ %@ 1;.10 1;.10 /;.;0 %/9.;0 ;.B
@@1 %A 1;.10 1;.10 /;.;0 %/1.;0 ;.B
@@9 %B 1;.10 1;.10 /;.;0 %//.;0 ;.B
@@; %= 1;.10 1;.10 /;.;0 %/2.;0 ;.B
@@0 %/2 1;.10 1;.10 /;.;0 %=.;0 ;.B
@@@ %// 1;.10 1;.10 /;.;0 %B.;0 ;.B
@@A %/1 1;.10 1;.10 /;.;0 %A.;0 ;.B
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@@B %/9 1;.10 1;.10 /;.;0 %@.;0 ;.B
@@= %/; 1;.10 1;.10 /;.;0 %0.;0 ;.B
@A2 %/0 1;.10 1;.10 /;.;0 %;.;0 ;.B
@A/ %/@ 1;.10 1;.10 /;.;0 %9.;0 ;.B
@A1 %/A 1;.10 1;.10 /;.;0 %1.;0 ;.B
@A9 %/B 1;.10 1;.10 /;.;0 %/.;0 ;.B
@A; %/= 1;.10 1;.10 /;.;0 %2.;0 ;.B
@A0 %12 1;.10 1;.10 /;.;0 2.00 ;.B
@A@ %1/ 1;.10 1;.10 /;.;0 /.00 ;.B
@AA %11 1;.10 1;.10 /;.;0 1.00 ;.B
@AB %19 1;.10 1;.10 /;.;0 9.00 ;.B
@A= %1; 1;.10 1;.10 /;.;0 ;.00 ;.B
@B2 %10 1;.10 1;.10 /;.;0 0.00 ;.B
@B/ %1@ 1;.10 1;.10 /;.;0 @.00 ;.B
@B1 %1A 1;.10 1;.10 /;.;0 A.00 ;.B
@B9 %1B 1;.10 1;.10 /;.;0 B.00 ;.B
@B; %1= 1;.10 1;.10 /;.;0 =.00 ;.B
@B0 %92 1;.10 1;.10 /;.;0 /2.00 ;.B
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
&>, Lon- )oA
DE%CR/PT/ON: # 8ong on 5all 4 Short on &ut at a low Strike &rice ,/, 4 8ong on &ut 4
short on 5all at a -igh Strike &rice ,1
PA.OFF: +t any St, There is fi#ed profit of "et &remium .eceived
When to 2se3 % When u have a !earish (utlook
Market eA"ectation3 Direction neutral*volatility neutral. This is a Mlocked tradeM, 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 e#ploited.
Profit an$ loss characteristics at eA"ir63
If the pricing differential can be e#ploited, a profit will occur, the e#tent of the mis%pricing
translating into the level of profit realized. The !o# is regularly used by traders to close out
positions near e#piry.
>enerally traded at par FzeroG for options on futures, and at the net cost of carry for inde#
and e'uity options. 5an be problematic if all positions are not closed out at e#actly the same
time.
5urrent &rice of the Stock NSoN @;B
Strike &rice of 5all (ptionN,c/N @12
&remium of 5all (ptionNc/N.s. 9;.@0
Strike &rice of &ut (ptionN,p/N @12
&remium of &ut (ptionN&/N .s. A.B0
Strike &rice of 5all (ptionN,c1N @B2
&remium of 5all (ptionN51N.s. @.=0
Strike &rice of &ut (ption N,p1N @B2
&remium of &ut (ption N&1N .s. [email protected]
N.R.INSTITUTE OF BUSINESS MANAGEMENT
PA.#OFF TA)LE
St
&remium
for ,c/
>ain *
8oss on
,c/
&remium
for ,p/
>ain *
8oss on
,p/
&remium
for ,c1
>ain *
8oss on
,c1
&remium
for ,p1
>ain *
8oss on
,p1
Total
>ain*8oss
@22 9;.@0 %9;.@0 A.B0 %/1./0 @.=0 @.=0 [email protected] ;9.0 9.@0
@2/ 9;.@0 %9;.@0 A.B0 %//./0 @.=0 @.=0 [email protected] ;1.0 9.@0
@21 9;.@0 %9;.@0 A.B0 %/2./0 @.=0 @.=0 [email protected] ;/.0 9.@0
@29 9;.@0 %9;.@0 A.B0 %=./0 @.=0 @.=0 [email protected] ;2.0 9.@0
@2; 9;.@0 %9;.@0 A.B0 %B./0 @.=0 @.=0 [email protected] 9=.0 9.@0
@20 9;.@0 %9;.@0 A.B0 %A./0 @.=0 @.=0 [email protected] 9B.0 9.@0
@2@ 9;.@0 %9;.@0 A.B0 %@./0 @.=0 @.=0 [email protected] 9A.0 9.@0
@2A 9;.@0 %9;.@0 A.B0 %0./0 @.=0 @.=0 [email protected] [email protected] 9.@0
@2B 9;.@0 %9;.@0 A.B0 %;./0 @.=0 @.=0 [email protected] 90.0 9.@0
@2= 9;.@0 %9;.@0 A.B0 %9./0 @.=0 @.=0 [email protected] 9;.0 9.@0
@/2 9;.@0 %9;.@0 A.B0 %1./0 @.=0 @.=0 [email protected] 99.0 9.@0
@// 9;.@0 %9;.@0 A.B0 %/./0 @.=0 @.=0 [email protected] 91.0 9.@0
@/1 9;.@0 %9;.@0 A.B0 %2./0 @.=0 @.=0 [email protected] 9/.0 9.@0
@/9 9;.@0 %9;.@0 A.B0 2.B0 @.=0 @.=0 [email protected] 92.0 9.@0
@/; 9;.@0 %9;.@0 A.B0 /.B0 @.=0 @.=0 [email protected] 1=.0 9.@0
@/0 9;.@0 %9;.@0 A.B0 1.B0 @.=0 @.=0 [email protected] 1B.0 9.@0
@/@ 9;.@0 %9;.@0 A.B0 9.B0 @.=0 @.=0 [email protected] 1A.0 9.@0
@/A 9;.@0 %9;.@0 A.B0 ;.B0 @.=0 @.=0 [email protected] [email protected] 9.@0
@/B 9;.@0 %9;.@0 A.B0 0.B0 @.=0 @.=0 [email protected] 10.0 9.@0
@/= 9;.@0 %9;.@0 A.B0 @.B0 @.=0 @.=0 [email protected] 1;.0 9.@0
@12 9;.@0 %9;.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 19.0 9.@0
@1/ 9;.@0 %99.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 11.0 9.@0
@11 9;.@0 %91.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 1/.0 9.@0
@19 9;.@0 %9/.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 12.0 9.@0
@1; 9;.@0 %92.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /=.0 9.@0
@10 9;.@0 %1=.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /B.0 9.@0
@1@ 9;.@0 %1B.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /A.0 9.@0
@1A 9;.@0 %1A.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /@.0 9.@0
@1B 9;.@0 %1@.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /0.0 9.@0
@1= 9;.@0 %10.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /;.0 9.@0
@92 9;.@0 %1;.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /9.0 9.@0
@9/ 9;.@0 %19.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /1.0 9.@0
@91 9;.@0 %11.@0 A.B0 A.B0 @.=0 @.=0 [email protected] //.0 9.@0
@99 9;.@0 %1/.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /2.0 9.@0
@9; 9;.@0 %12.@0 A.B0 A.B0 @.=0 @.=0 [email protected] =.0 9.@0
@90 9;.@0 %/=.@0 A.B0 A.B0 @.=0 @.=0 [email protected] B.0 9.@0
@9@ 9;.@0 %/B.@0 A.B0 A.B0 @.=0 @.=0 [email protected] A.0 9.@0
@9A 9;.@0 %/A.@0 A.B0 A.B0 @.=0 @.=0 [email protected] @.0 9.@0
@9B 9;.@0 %/@.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 0.0 9.@0
@9= 9;.@0 %/0.@0 A.B0 A.B0 @.=0 @.=0 [email protected] ;.0 9.@0
@;2 9;.@0 %/;.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 9.0 9.@0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
@;/ 9;.@0 %/9.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 1.0 9.@0
@;1 9;.@0 %/1.@0 A.B0 A.B0 @.=0 @.=0 [email protected] /.0 9.@0
@;9 9;.@0 %//.@0 A.B0 A.B0 @.=0 @.=0 [email protected] 2.0 9.@0
@;; 9;.@0 %/2.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %2.0 9.@0
@;0 9;.@0 %=.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %/.0 9.@0
@;@ 9;.@0 %B.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %1.0 9.@0
@;A 9;.@0 %A.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %9.0 9.@0
@;B 9;.@0 %@.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %;.0 9.@0
@;= 9;.@0 %0.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %0.0 9.@0
@02 9;.@0 %;.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %@.0 9.@0
@0/ 9;.@0 %9.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %A.0 9.@0
@01 9;.@0 %1.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %B.0 9.@0
@09 9;.@0 %/.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %=.0 9.@0
@0; 9;.@0 %2.@0 A.B0 A.B0 @.=0 @.=0 [email protected] %/2.0 9.@0
@00 9;.@0 2.90 A.B0 A.B0 @.=0 @.=0 [email protected] %//.0 9.@0
@0@ 9;.@0 /.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/1.0 9.@0
@0A 9;.@0 1.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/9.0 9.@0
@0B 9;.@0 9.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/;.0 9.@0
@0= 9;.@0 ;.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/0.0 9.@0
@@2 9;.@0 0.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/@.0 9.@0
@@/ 9;.@0 @.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/A.0 9.@0
@@1 9;.@0 A.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/B.0 9.@0
@@9 9;.@0 B.90 A.B0 A.B0 @.=0 @.=0 [email protected] %/=.0 9.@0
@@; 9;.@0 =.90 A.B0 A.B0 @.=0 @.=0 [email protected] %12.0 9.@0
@@0 9;.@0 /2.90 A.B0 A.B0 @.=0 @.=0 [email protected] %1/.0 9.@0
@@@ 9;.@0 //.90 A.B0 A.B0 @.=0 @.=0 [email protected] %11.0 9.@0
@@A 9;.@0 /1.90 A.B0 A.B0 @.=0 @.=0 [email protected] %19.0 9.@0
@@B 9;.@0 /9.90 A.B0 A.B0 @.=0 @.=0 [email protected] %1;.0 9.@0
@@= 9;.@0 /;.90 A.B0 A.B0 @.=0 @.=0 [email protected] %10.0 9.@0
@A2 9;.@0 /0.90 A.B0 A.B0 @.=0 @.=0 [email protected] %[email protected] 9.@0
@A/ 9;.@0 /@.90 A.B0 A.B0 @.=0 @.=0 [email protected] %1A.0 9.@0
@A1 9;.@0 /A.90 A.B0 A.B0 @.=0 @.=0 [email protected] %1B.0 9.@0
@A9 9;.@0 /B.90 A.B0 A.B0 @.=0 @.=0 [email protected] %1=.0 9.@0
@A; 9;.@0 /=.90 A.B0 A.B0 @.=0 @.=0 [email protected] %92.0 9.@0
@A0 9;.@0 12.90 A.B0 A.B0 @.=0 @.=0 [email protected] %9/.0 9.@0
@A@ 9;.@0 1/.90 A.B0 A.B0 @.=0 @.=0 [email protected] %91.0 9.@0
@AA 9;.@0 11.90 A.B0 A.B0 @.=0 @.=0 [email protected] %99.0 9.@0
@AB 9;.@0 19.90 A.B0 A.B0 @.=0 @.=0 [email protected] %9;.0 9.@0
@A= 9;.@0 1;.90 A.B0 A.B0 @.=0 @.=0 [email protected] %90.0 9.@0
@B2 9;.@0 10.90 A.B0 A.B0 @.=0 @.=0 [email protected] %[email protected] 9.@0
@B/ 9;.@0 [email protected] A.B0 A.B0 @.=0 0.=0 [email protected] %[email protected] 9.@0
@B1 9;.@0 1A.90 A.B0 A.B0 @.=0 ;.=0 [email protected] %[email protected] 9.@0
@B9 9;.@0 1B.90 A.B0 A.B0 @.=0 9.=0 [email protected] %[email protected] 9.@0
@B; 9;.@0 1=.90 A.B0 A.B0 @.=0 1.=0 [email protected] %[email protected] 9.@0
@B0 9;.@0 92.90 A.B0 A.B0 @.=0 /.=0 [email protected] %[email protected] 9.@0
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
F/ND/NG%:
F/G (pen Interest 4 &ut*5all .atio are the most important indicators
which help to determine the trend of "ifty for the ne#t trading day.
F1G &ut*5all .atio can be calculated on the basis of3
FaG (pen Interest
FbG 6olume
uts
FbG 8ong Straddle
FcG Short 5ondor
.ange !ound FaG Double Top
FbG 5hristmas Trees
N.R.INSTITUTE OF BUSINESS MANAGEMENT
FAG !y practicing such type of trading strategy, one can earn unlimited
profits if the market turns in favorable zone 4 if the market moves
other way round, loss e#posure is limited to a certain e#tent.
FBG !y practicing such trading strategies, an investor can predict his
ma#imum loss in advance which is not the case if he trades without
framing such trading strategies.
F=G There are certain (pportunistic trading strategy in the market in
which one can earn fi#ed amount of profit, irrespective of the
market movement, such type of Trading strategies are known as
+rbitrage Trading strategies which are not readily available but one
has to grab such opportunities from the market from the price
movements.
N.R.INSTITUTE OF BUSINESS MANAGEMENT
CONCL2%/ON:
There are many indicators which can be used while trading in
derivative market but widely used 4 more effective are open interest 4
put call ratio. Investors can study both together 4 can arrive at
meaningful trend. These indicators can also be ointly used with
technical analysis indicators to find out profitable buying 4 selling
points.
Trading strategy can be framed by individual taking several
considerations like view for the market%bullish, bearish or uncertain,
type of trader%hedger, speculator or arbitrageur, risk appetite, period of
investment, type of analysis%fundamental or technical analysis etc.!ut
important thing is to minimize loss 4 take the right opportunity. "ow a
day markets are very volatile, so it is in the interest of investors to
frame volatile market strategies as stated above rather than to have
one view. Investors should have constant look on the market to
e#ecute opportunistic strategies which gives fi# amount of profit
irrespective of market fluctuations. Investors rather than keeping one
view bullish or bearish its better to have volatile market strategy with
limited loss and limited profits.
N.R.INSTITUTE OF BUSINESS MANAGEMENT
!!8O*RAP65
BOOKS:
? OPTIONS AND FUTURES –IN INDIAN PERSPECTIE
? D. C. PATWARI
? OPTIONS! FUTURES AND OTHER DERIATIES
? JOHN C. HULL
? TECHNICAL ANALYSIS OF FUTURES MAR"ET
? JOHN MURPHY
? FUTURES AND OPTIONS
? N.D. OHRA # B.R. BAGRI
WEB SITES:
www.sebi.com
www.bseindia.com
www.nseindia.com
www.derivativesindia.com
www.hathwaysecurities.com
www.moneycontrol.com
www.arcadiastock.com
www.anagram.com
%OFTWARE:
• 5+&IT+8I") ")(
• (DI)" DI)T (< "S)
N.R.INSTITUTE OF BUSINESS MANAGEMENT
*8OSSAR5
A5erican#st6le O"tion3 +n option contract that may be e#ercised at any
time between the date of purchase and the e#piration date.
At#the#5one6: (ption whose e#ercise price is the same as the market price
of the underlying asset.
)ear: Someone who thinks market prices will decline.
)!ll: Someone who thinks market prices will rise.
Call: +n option contract granting the purchaser the right to buy the
underlying instruments at the agreed strike price. + call obliges the seller to
sell the underlying instrument at the agreed strike price, if the option is
assigned to him.
Cash settle5ent: Settlement of a contract by payment or receipt of a
settlement amount instead of the physical delivery of the underlying asset.
Closin-: 5onducting a transaction, which offsets the original trade and
li'uidates an e#isting position.
Contract !nit: The number of units of the underlying instrument on which
the contract bears, i.e. contract size. This may vary according to the
underlying on which the contract bears.
E!ro"ean#st6le o"tions: +n option that can be e#ercised by the buyer only
on the contract e#piration date.
EAercise: + decision, reserved for the option holder, to re'uest e#ecution of
the contract.
EA"iration $ate: The date on which the option contract e#pires.
e$-e: + conservative strategy used to limit investment loss by effecting a
transaction, which offsets an e#isting position.
ol$er: The party who purchased an option.
N.R.INSTITUTE OF BUSINESS MANAGEMENT
/n#the#5one6: + call is said to be Hin%the%moneyH when the value of the
underlying instrument is greater than the option strike price. + put is Hin%
the%moneyH when its strike price is greater than the value of the underlying
instrument.
/ntrinsic *al!e: The intrinsic value of an option is the difference between
the actual price of the underlying security and the strike price of the option.
The intrinsic value of an option reflects the effective financial advantage that
would result from the immediate e#ercise of that option.
LiB!i$it6: $arket situation in which 'uick purchase or sale of a security is
possible without causing substantial changes in prices.
Lon- "osition: +n investor7s position where the number of contracts bought
e#ceeds the number of contracts sold. -e is a net holder.
Lot si3e: "umber of contract you want to buy or sell
Maintenance Mar-in: + set minimum margin that a customer must
maintain in his margin account.
Mark#To#Market: 6aluation of a financial instrument according to the
current trading value FpriceG on the e#change.
O"en interest: The number of outstanding option contracts in the e#change
market or in a particular class or series.
O"tion: + contract that conveys the right, but not the obligation, to buy or
sell a particular item at a certain price for a limited time. (nly the seller of
the option is obligated to perform.
O!t#of#the#5one6: + call is Hout%of%the%moneyH when the value of the
underlying instrument is less than the option strike price. + put is Hout%of%
the%moneyH when its strike price is less than the value of the underlying
instrument.
Pre5i!5: The price of an optionIthe sum of money that the option buyer
pays and the option seller receives for the rights granted by the option.
P!t: +n option contract granting the purchaser the right to sell the
underlying instruments at the agreed strike price. + put obliges the seller to
N.R.INSTITUTE OF BUSINESS MANAGEMENT
purchase the underlying instrument at the agreed strike price, if the option
is assigned to him.
%hort "osition: +n investor7s position where the number of contracts sold
e#ceeds the number of contracts bought. The person is a net seller.
%"ot Price: .efers to the underlying current market price.
%trike "rice or eAercise "rice: The price at which the option holder may
purchase Fin case of callG or sell Fin case of putG the underlying instrument.
Ti5e *al!e: It is determined by the remaining lifespan of the option, the
volatility and the cost of refinancing the underlying asset Finterest ratesG.
Time value N option price % intrinsic value
2n$erl6in- asset4 !n$erl6in- instr!5ent: The instrument Fshares,
bonds, stock inde#[G that can be purchased Fin case of callG or sold Fin case
of a putG by a buyer who e#ercises his option.
'olatilit6: It is a measure for the fluctuation range of the underlying price.
The greater the volatility, the higher the option price.
N.R.INSTITUTE OF BUSINESS MANAGEMENT
N.R.INSTITUTE OF BUSINESS MANAGEMENT
doc_730859104.doc