华东师范大学：《金融工程》英文版 Chapter 8 Trading strategies Involving options

8.1 Trading Strategies Involving options Chapter 8 Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, C 2003, Shanghai Normal University

Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, © 2003, Shanghai Normal University 8.1 Trading Strategies Involving Options Chapter 8

8.2 Three Alternative Strategies Take a position in the option and the underlying 2 or more options of the same type This is known as a spread a mixture of calls and puts This is known as a combination Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, C 2003, Shanghai Normal University

Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, © 2003, Shanghai Normal University 8.2 Three Alternative Strategies • Take a position in: – the option and the underlying – 2 or more options of the same type • This is known as a spread – a mixture of calls and puts • This is known as a combination

8.3 Payoffs from Options Figure 8.1(p. 186)(Remember c-p=So-Xe-rm) Profit Profit X ¨ Short call long stock Long call short Stock Profit Profit Long put long stock Short put short stock Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, C 2003, Shanghai Normal University

Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, © 2003, Shanghai Normal University 8.3 Payoffs from Options • Figure 8.1 (p. 186) (Remember c – p = S0 – Xe-rT) Profit X ST Short Call Long Stock X ST Long Call Short Stock Profit X ST Long Put Long Stock Profit Profit X ST Short Put Short Stock •

8.4 Bull Spread Using Calls (Figure 8.2, page 187) requires an initial investment Profit Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, C 2003, Shanghai Normal University

Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, © 2003, Shanghai Normal University 8.4 Bull Spread Using Calls (Figure 8.2, page 187) X1 X2 Profit ST -- requires an initial investment

8.5 Bull Spread Using puts Figure 8.3, page 189 involves a positive cash flow Profit X Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, C 2003, Shanghai Normal University

Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, © 2003, Shanghai Normal University 8.5 Bull Spread Using Puts Figure 8.3, page 189 X1 X2 Profit ST -- involves a positive cash flow

8.6 Bear Spread Using Calls Figure 8.4, page 189 Profi involves a positive cash flow X Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, C 2003, Shanghai Normal University

Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, © 2003, Shanghai Normal University 8.6 Bear Spread Using Calls Figure 8.4, page 189 X1 X2 Profi t ST -- involves a positive cash flow

8.7 Bear Spread Using Puts Figure 8.5, page 190 requires an initial investment Profit e"""" Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, C 2003, Shanghai Normal University

Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, © 2003, Shanghai Normal University 8.7 Bear Spread Using Puts Figure 8.5, page 190 X1 X2 Profit ST -- requires an initial investment

8.8 Butterfly Spread Using Calls Figure 8.6, page 191 requires a small investment initially Profit X/XX Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, C 2003, Shanghai Normal University

Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, © 2003, Shanghai Normal University 8.8 Butterfly Spread Using Calls Figure 8.6, page 191 X1 X3 Profit X2 ST -- requires a small investment initially

8.9 Butterfly Spread Using Puts Figure 8.7, page 192 requires a small investment initially Pp rofit Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, C 2003, Shanghai Normal University

Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, © 2003, Shanghai Normal University 8.9 Butterfly Spread Using Puts Figure 8.7, page 192 X1 X3 Profit X2 ST -- requires a small investment initially

Calendar Spread Using Calo Figure 8.8, page 193 Profit T Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, C 2003, Shanghai Normal University

Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, © 2003, Shanghai Normal University 8.10 Calendar Spread Using Calls Figure 8.8, page 193 X Profit ST