金融工程学课件：Chapter 6Basic Option Strategies

1、Chapter 6 Basic Option Strategies,The profit equation,Different holding periods,Assumptions,The stock pays no dividends There are no taxes or transaction costs,Stock transactions,Buy a call,The choice of exercise price,The higher the exercise price, the less the potential gain The higher the exercis

2、e price, the lower the premium,The choice of holding period,The shorter holding period provides superior profits for a given stock price. On the other hand, the longer holding period gives the stock price more time to increse. Page 170, Table 6.2,Write a call,The choice of exercise price,The lower t

3、he strike price, the higher the premium, the lower the breakeven stock price and the higher potential loss,The choice of holding period,For a call writer, the profit is lower with the shorter holding period for a given stock price,Buy a put,It is easier to execute a put transaction than a short sale

4、.,The choice of exercise price,The higher the exercise price, the higher the premium.,The choice of holding period,The shorter holding periods, the greater potential profit for a given stock price.,Write a put,The choice of exercise price,The higher the exercise price, the higher premium income, but

5、 the greater the potential loss.,The choice of holding period,The put writer who chooses a shorter holding period makes a smaller profit or incurs a greater loss for a given stock price.,The covered call,The choice of exercise price,The higher the exercise price, the greater the potential profit, th

6、e greater the potential loss.,The choice of holding period,The shorter holding period, the smaller profit for a given stock price.,General consideration with covered calls,The prices of calls fall so low that the strategy would no longer be attractive. Stocks may be called away by exercise Rolling u

7、p strategy leads to less downside protection and higher transaction costs. It should be viewed as a risk-reducing rather than return-enhancing strategy.,The protective put,The choice of exercise price,The higher the exercise price, the less the potential loss, and the greater the potential profit.,T

8、he choice of holding period,The shorter holding period provides more coverage for a given stock price. The choice of holding periods depends on the investors view of the probable stock price moves and the period over which they are likely to occur.,There are advantages and disadvantages to each strategies that one must carefully weigh before making a decision.,Synthetic put,Why use synthetic put,There once were restrictions on the li