36 lines
1.5 KiB
Plaintext
36 lines
1.5 KiB
Plaintext
Chapter 35: Futures Option Strategies for Futures Spreads 707
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2. Draw several profit curves, one for each price of the near-term future at near
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term expiration.
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Example: Expanding on the above example, this method is demonstrated here.
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Figure 35-1 shows how to approach the problem. The horizontal axis depicts
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the spread between March and May soybean futures at the expiration of the March
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futures options. The vertical axis represents the profit and loss to be expected from
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the calendar spread, as it always does.
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The major difference between this profit graph and standard ones is that there
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are now several sets of profit curves. A separate one is drawn for each price of the
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March futures that one wants to consider in his analysis. The previous example
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showed the profitability for only one price of the March futures - unchanged at 594.
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However, one cannot rely on the March futures to remain unchanged, so he must
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view the profitability of the calendar spread at various March futures prices.
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The data that is plotted in the figure is summarized in Table 35-4. Several things
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are readily apparent. First, if the futures spread improves in price, the calendar
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spread will generally make money. These are the points on the far right of the figure
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and on the bottom line of Table 35-4. Second, if the futures spread behaves miser-
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FIGURE 35-1.
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Soybean futures calendar spreads, at March expiration.
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gj
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20
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16
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12
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.3 8
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::.:
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0
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ct 4
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0
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-8
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March/May Spread
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March =604
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March =594
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March= 614
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March =584
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March= 574 |