Add training workflow, datasets, and runbook

training_data/curated/text/563fa3ae22f2c0584e37147f786ae94518f8485ea907b5b37a2c7478de6de20a.txt

@@ -0,0 +1,44 @@
+630 Part V: Index Options and Futures 
+be interested in neutrality. The key to determining one's neutrality, of course, is tc 
+use the delta of the option. In the case of the PERCS stock, one would have to usE 
+the delta of the imbedded call. 
+Example: An investor is long 1,000 shares ofXYZ PERCS maturing in two years. He 
+thinks XYZ is stuck in a trading range and does not expect much volatility in the near 
+future. Thus, a ratio write appeals to him. How many calls should he sell in order to 
+create a neutral position against his 1,000 shares? 
+First, he needs to compute the delta of the imbedded option in the PER CS, and 
+therefore the delta of the PERCS itself. The delta of a PERCS is not 1.00, as is the 
+delta of common stock. 
+Assume the XYZ PERCS matures in two years. It is redeemable at 39 at that 
+time. XYZ common is currently trading at 33. The delta of a two-year call with strik­
+ing price 39 and common stock at 33 can be calculated (the dividends, short-term 
+interest rate, and volatility all play a part). Suppose that the delta of such an option is 
+0.30. Then the delta of the PER CS can be computed: 
+PERCS delta= 1.00- Delta of imbedded call 
+= 1.00 - 0.30 = 0.70 in this example 
+Assume the following data is known: 
+Security 
+XYZ Common 
+XYZ PERCS 
+XYZ October 40 call 
+Price 
+33 
+34 
+2 
+Delta 
+1.00 
+0.70(!) 
+0.35 
+Being long 1,000 PER CS shares is the equivalent of being long 700 shares of 
+common (ESP= 1,000 x 0.70 = 700). In order to properly hedge that ESP with the 
+October 40 call, one would need to sell 20 October 40 calls. 
+Quantity to sell = ESP of PER CS/ESP of October 40 call 
+= 700/(100 shares per option x 0.35) 
+= 700/35 = 20 
+Thus, the position - long 1,000 PER CS, short 20 October 40 calls - is a neutral one 
+and it is a ratio write. 
+One may not want to have such a steep ratio, since the result of this example is 
+the equivalent of being long 1,000 common and short 30 calls in total (10 are imbed­
+ded in the long PERCS). Consequently, he could look at other options - perhaps 
+writing in-the-money October calls - that have higher deltas and won't require so 
+many to be sold in order to produce a neutral position.