logging in or signing up Financial derivatives: Keller sundevaa Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINT lite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 1992 Category: Entertainment License: All Rights Reserved Like it (0) Dislike it (0) Added: December 19, 2008 This Presentation is Public Favorites: 2 Presentation Description Derivative strategy, covered call , butterfly Comments Posting comment... By: basu.rose143 (15 month(s) ago) this one is sup up Saving..... Post Reply Close Saving..... Edit Comment Close Premium member Presentation Transcript Financial Derivatives : Financial Derivatives Keller Funds Option Investment strategy Group 7 Anantjit Pradeep Soubhagya Surya Prashant Rao Suvarthi VOLATILITY : VOLATILITY Returns on Lotus are more volatile Returns on AT&T have SD of 0.11 (Rough Estimate) AMERICAN OPTION PRICING : AMERICAN OPTION PRICING Arbitrage opportunity occurs if the following condition is not followed Call + Strike price>= Stock + put >= Call + PV(Strike) Ca(So,T,X)+X >=So+Pa(So,T,X)>=Ca(So,T,X)+Xe^-rT Example Lotus January So+Pa(So,T,X) < Ca(So,T,X)+X Ca Cost of Call Pa Cost of Put X Strike Price LONG CALL : LONG CALL Bullish in the near term Increase in implied volatility would have a positive impact on this strategy AT & T :Better upside gain, lower downside losses LONG PUT : LONG PUT Very bearish to neutral. If bullish on the underlying stock in the long run, other strategy alternatives might be more suitable: Protective Puts Increase in implied volatility would have a positive impact on this strategy WRITE CALL : WRITE CALL Expects stagnant and listless markets Increase in implied volatility would have a negative impact on this strategy WRITE PUT : WRITE PUT Expecting a steady or rising stock price during life of option, and considers the likelihood of a decline very remote. An increase in implied volatility would have a negative impact on this strategy COVERED CALL : COVERED CALL Expecting steady or slightly rising stock price for at least the term of the option An increase in implied volatility would have a neutral to slightly negative impact on this strategy PROTECTED PUT : PROTECTED PUT This strategy is a hedge against a temporary dip in the stock's value An increase in implied volatility would have a neutral to slightly positive impact on this strategy LONG STRADDLE : LONG STRADDLE Big price move and/or a great deal of volatility in the foreseeable future Fueled by an increase in implied volatility Looking for a sharp move in the stock price, in either direction, during the life of the options. BULL PUT SPREAD : BULL PUT SPREAD Limited risk and reward potential. Expecting stock price stays steady or rises. BEAR CALL SPREAD : BEAR CALL SPREAD Income with limited risk, or to profit from a rise in the underlying stock's price, or both This strategy entails precisely limited risk and reward potential. The effects of volatility shifts on the two contracts may offset each other to a large degree. LONG BUTTERFLY : LONG BUTTERFLY This strategy profits if the underlying stock is at the body of the butterfly at expiration. An increase in implied volatility, all other things equal, will usually have a slightly negative impact on this strategy. This strategy has an extremely high expiration risk. Mimic : Mimic Match portfolio returns without underlying investment Synthetic : Synthetic Match portfolio returns with investment You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.
Financial derivatives: Keller sundevaa Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINT lite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 1992 Category: Entertainment License: All Rights Reserved Like it (0) Dislike it (0) Added: December 19, 2008 This Presentation is Public Favorites: 2 Presentation Description Derivative strategy, covered call , butterfly Comments Posting comment... By: basu.rose143 (15 month(s) ago) this one is sup up Saving..... Post Reply Close Saving..... Edit Comment Close Premium member Presentation Transcript Financial Derivatives : Financial Derivatives Keller Funds Option Investment strategy Group 7 Anantjit Pradeep Soubhagya Surya Prashant Rao Suvarthi VOLATILITY : VOLATILITY Returns on Lotus are more volatile Returns on AT&T have SD of 0.11 (Rough Estimate) AMERICAN OPTION PRICING : AMERICAN OPTION PRICING Arbitrage opportunity occurs if the following condition is not followed Call + Strike price>= Stock + put >= Call + PV(Strike) Ca(So,T,X)+X >=So+Pa(So,T,X)>=Ca(So,T,X)+Xe^-rT Example Lotus January So+Pa(So,T,X) < Ca(So,T,X)+X Ca Cost of Call Pa Cost of Put X Strike Price LONG CALL : LONG CALL Bullish in the near term Increase in implied volatility would have a positive impact on this strategy AT & T :Better upside gain, lower downside losses LONG PUT : LONG PUT Very bearish to neutral. If bullish on the underlying stock in the long run, other strategy alternatives might be more suitable: Protective Puts Increase in implied volatility would have a positive impact on this strategy WRITE CALL : WRITE CALL Expects stagnant and listless markets Increase in implied volatility would have a negative impact on this strategy WRITE PUT : WRITE PUT Expecting a steady or rising stock price during life of option, and considers the likelihood of a decline very remote. An increase in implied volatility would have a negative impact on this strategy COVERED CALL : COVERED CALL Expecting steady or slightly rising stock price for at least the term of the option An increase in implied volatility would have a neutral to slightly negative impact on this strategy PROTECTED PUT : PROTECTED PUT This strategy is a hedge against a temporary dip in the stock's value An increase in implied volatility would have a neutral to slightly positive impact on this strategy LONG STRADDLE : LONG STRADDLE Big price move and/or a great deal of volatility in the foreseeable future Fueled by an increase in implied volatility Looking for a sharp move in the stock price, in either direction, during the life of the options. BULL PUT SPREAD : BULL PUT SPREAD Limited risk and reward potential. Expecting stock price stays steady or rises. BEAR CALL SPREAD : BEAR CALL SPREAD Income with limited risk, or to profit from a rise in the underlying stock's price, or both This strategy entails precisely limited risk and reward potential. The effects of volatility shifts on the two contracts may offset each other to a large degree. LONG BUTTERFLY : LONG BUTTERFLY This strategy profits if the underlying stock is at the body of the butterfly at expiration. An increase in implied volatility, all other things equal, will usually have a slightly negative impact on this strategy. This strategy has an extremely high expiration risk. Mimic : Mimic Match portfolio returns without underlying investment Synthetic : Synthetic Match portfolio returns with investment