60 lines
2.4 KiB
Plaintext
60 lines
2.4 KiB
Plaintext
534
|
||
A Complete Guide to the Futures mArket
|
||
Thus:
|
||
Ratio call writ el ong c all short put short c alls or
|
||
Rati
|
||
≈+ + 2,
|
||
oo call wr ite short put short call≈+
|
||
The right-hand term of this last equation is, in fact, the definition of a short straddle. In similar
|
||
fashion, it can be demonstrated that a short put write (short futures + short 2 puts) would also yield
|
||
a profit/loss profile nearly identical to the short straddle position.
|
||
Strategy 18: bull Call Money Spread (Long Call with Lower Strike
|
||
price/Short Call with higher Strike price)
|
||
example. Buy an August $1,250 gold futures call at a premium of $19.20/oz ($1,920) and
|
||
simultaneously sell an August $1,300 call at a premium of $9.10 ($910). (See Table 35.18 and
|
||
Figure 35.18.)
|
||
Comment. This type of spread position is also called a debit spread because the amount of premium
|
||
paid for the long call is greater than the amount of the premium received for the short call. The maxi-
|
||
mum risk in this type of trade is equal to the difference between these two premiums. The maximum
|
||
possible gain in this spread will be equal to the difference between the two strike prices minus the
|
||
net difference between the two premiums. The maximum loss will occur if prices fail to rise at least
|
||
beyond the lowest strike price. The maximum gain will be realized if prices rise above the higher
|
||
strike price. Note that although the maximum profit exceeds the maximum risk by a factor of nearly
|
||
4 to 1, the probability of a loss is significantly greater than the probability of a gain. This condition is
|
||
true since prices must rise $60.10/oz before the strategy proves profitable.
|
||
tabLe 35.18 profit/Loss Calculations: bull Call Money Spread (Long Call with Lower Strike price/
|
||
Short Call with higher Strike price)
|
||
(1) (2) (3) (4) (5) (6) (7) (8)
|
||
Futures price
|
||
at expiration
|
||
($/oz)
|
||
premium of
|
||
august $1,250
|
||
Call ($/oz)
|
||
$ amount
|
||
of premium
|
||
paid
|
||
premium of
|
||
august $1,300
|
||
Call ($/oz)
|
||
Dollar amount
|
||
of premium
|
||
received
|
||
$1,250 Call
|
||
Value at
|
||
expiration
|
||
$1,300 Call
|
||
Value at
|
||
expiration
|
||
profit/Loss on
|
||
position
|
||
[(5) − (3) + (6) − (7)]
|
||
1,000 19.2 $1,920 9.1 $910 $0 $0 -$1,010
|
||
1,050 19.2 $1,920 9.1 $910 $0 $0 -$1,010
|
||
1,100 19.2 $1,920 9.1 $910 $0 $0 -$1,010
|
||
1,150 19.2 $1,920 9.1 $910 $0 $0 -$1,010
|
||
1,200 19.2 $1,920 9.1 $910 $0 $0 -$1,010
|
||
1,250 19.2 $1,920 9.1 $910 $0 $0 -$1,010
|
||
1,300 19.2 $1,920 9.1 $910 $5,000 $0 $3,990
|
||
1,350 19.2 $1,920 9.1 $910 $10,000 $5,000 $3,990
|
||
1,400 19.2 $1,920 9.1 $910 $15,000 $10,000 $3,990 |