Add training workflow, datasets, and runbook
This commit is contained in:
@@ -0,0 +1,27 @@
|
||||
Chapter 13: Reverse Spreads
|
||||
FIGURE 13-2.
|
||||
Reverse ratio spread (backspread).
|
||||
C:
|
||||
~ +$200
|
||||
;%
|
||||
:!::
|
||||
e
|
||||
a. -$300
|
||||
Stock Price at Expiration
|
||||
235
|
||||
merely used a 2:1 ratio for convenience, instead of using the 2.3:l ratio. If anything,
|
||||
one might normally establish the spread with an extra bullish emphasis, since the
|
||||
largest profits are to the upside. There is little reason for the spreader to have too lit
|
||||
tle bullishness in this strategy. Thus, if the deltas are correct, the neutral ratio can aid
|
||||
the spreader in the determination of a more accurate initial ratio.
|
||||
The strategist must be alert to the possibility of early exercise in this type of
|
||||
spread, since he has sold a call that is in-the-money. Aside from watching for this pos
|
||||
sibility, there is little in the way of defensive follow-up action that needs to be imple
|
||||
mented, since the risk is limited by the nature of the position. He might take profits
|
||||
by closing the spread if the stock rallies before expiration.
|
||||
This strategy presents a reasonable method of attempting to capitalize on a
|
||||
large stock movement with little tie-up of collateral. Generally, the strategist would
|
||||
seek out volatile stocks for implementation of this strategy, because he would want as
|
||||
much potential movement as possible by the time the calls expire. In Chapter 14, it
|
||||
will be shown that this strategy can become more attractive by buying calls with a
|
||||
longer maturity than the calls sold.
|
||||
Reference in New Issue
Block a user