34 lines
1.6 KiB
Plaintext
34 lines
1.6 KiB
Plaintext
524A COMPleTe gUIde TO THe FUTUreS MArKeT
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In most cases, the trader who fi nds the profi t/loss profi le of this strategy attractive would be better
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off buying a put, because the transaction costs are likely to be lower. However, if the trader already
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holds a short futures position, buying a call may be a reasonable alternative to liquidating this position
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and buying a put.
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Strategy 12b: Option-protected Short Futures (Short Futures + Long
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Out-of-the-Money Call)
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example . Sell August gold futures at $1,200/oz and simultaneously buy an August $1,300 gold
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futures call at a premium of $9.10/oz ($910). (See Table 35.12 b and Figure 35.12 b.)
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Comment. As can be verifi ed by comparing Figure 35.12 b to Figure 35.5 c, this strategy is virtually
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equivalent to buying an in-the-money put. Supplementing a short futures position with the purchase
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of an out-of-the-money call will result in slightly poorer results if the market declines or advances
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moderately, but will limit the magnitude of losses in the event of a sharp price advance. Thus, much
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as with the long in-the-money put position, this strategy can be viewed as a short position with a
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built-in stop.
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Price of August gold futures at option expiration ($/oz)
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Futures price at time
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of position initiation
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and strike priceBreakeven price = $1,161.20
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Profit/loss at expiration ($)
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1,000
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10,000
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17,500
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15,000
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12,500
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7,500
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5,000
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2,500
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−5,000
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−2,500
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0
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1,050 1,100 1,150 1,200 1,250 1,300 1,350 1,400
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FIGURE 35.12a Profi t/loss Profi le: Option-Protected Short Futures—Short Futures + long
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At-the-Money Call (Similar to long At-the-Money Put) |