56 lines
1007 B
Plaintext
56 lines
1007 B
Plaintext
124
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TABLE 4-2.
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Reverse hedge at July expiration.
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XYZ Price at Stock
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Expiration Profit
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20 +$2,000
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25 + 1,500
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30 + 1,000
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34 + 600
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40 0
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46 600
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50 - 1,000
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55 - 1,500
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60 - 2,000
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FIGURE 4-2.
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Reverse hedge {simulated straddle).
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C:
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0
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~
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!
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co
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(/)
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(/)
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.3
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~-$600
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e a.
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Profit on
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2 Calls
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-$ 600
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600
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600
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600
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600
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+ 600
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+ 1,400
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+ 2,400
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+ 3,400
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Stock Price at Expiration
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Part II: Call Option Strategies
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Total
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Profit
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+$ l ,400
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+ 900
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+ 400
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0
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600
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0
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+ 400
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+ 900
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+ 1,400
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The net margin required for this strategy is 50% of the underlying stock plus
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the full purchase price of the calls. In the example above, this would be an initial
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investment of $2,000 (50% of the stock price) plus $600 for the calls, or $2,600 total
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plus commissions. The short sale is marked to market, so the collateral requirement
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would grow if the stock rose. Since the maximum risk, before commissions, is $600,
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this means that the net percentage risk in this transaction is $600/$2,600, about 23%. |