tailieunhanh - A Logical Approach to Actuarial Mathematics_5

Tham khảo tài liệu 'a logical approach to actuarial mathematics_5', tài chính - ngân hàng, tài chính doanh nghiệp phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | 9 One by two directional spreads 99 One of our clients was a a trader for a major hedge fund who got caught out on a put 1x2. He began to cover their risk by selling futures. Then the other players in the market needed to sell futures in order to cover their risk. The market went down and down. Traders were ringing us up asking What s going on This don t make sense. Finally the spread-arbs stabilised the market but our client had lost big and he was furious. There were phone calls and meetings but fortunately it didn t get ugly. In the end he forgave us our sins because he accepted that the broker made an honest mistake. Like not knowing what he was doing. The lesson is either you work with an options strategist or you stick to 1x1s long vanillas and butterflies or condors. Either you work with an options strategist or you stick to 1x1s long vanillas and butterflies or condors 10 Combos and hybrid spreads for market direction Long call short put combo or cylinder Bullish strategy Still another way of financing a long call position is to sell a put. Usually both strikes are out-of-the-money and this spread is called the long call short put combo. It is also called the cylinder. If XYZ is at 100 you may buy the 110 call and sell the 85 put in the same transaction. In order to trade this spread you must be reasonably certain that the underlying is due to increase in value because the short put incurs the potential obligation to buy the underlying. The downside risk is great but so is the upside potential. Another way of financing a long call position is to sell a put This spread is often traded by professionals who want to buy the underlying. The long call serves as a buy-stop order while the short put serves as a resting buy order where value is estimated to be. Consider the following Coca-Cola at 60 days until August expiration Contract multiplier of 100 The August options are shown in Table .