40 lines
1.7 KiB
Plaintext
40 lines
1.7 KiB
Plaintext
538A COMPleTe gUIde TO THe FUTUreS MArKeT
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Strategy 20a: bull put Money Spread (Long put with Lower Strike
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price/Short put with higher Strike price)—Case 1
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example . Buy an August $1,250 gold futures put at a premium of $68.70/oz ($6,870) and simulta-
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neously sell an August $1,300 put at a premium of $108.70/oz ($10,870), with August gold futures
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trading at $1,200/oz. (See Table 35.20 a and Figure 35.20 a.)
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Comment. This is a net credit bull spread that uses puts instead of calls. The maximum gain in this
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strategy is equal to the diff erence between the premium received for the short put and the premium
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paid for the long put. The maximum loss is equal to the diff erence between the strike prices minus
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the diff erence between the premiums. The maximum gain will be achieved if prices rise to the higher
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strike price, while the maximum loss will occur if prices fail to rise at least to the lower strike price.
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The profi t/loss profi le of this trade is very similar to the profi le of the net debit bull call money
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spread illustrated in Figure 35.18 .
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Price of August gold futures at option expiration ($/oz)
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Profit/loss at expiration ($)
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1,000
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5,000
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2,500
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0
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−2,500
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−5,000
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−7 ,500
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−10,000
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−12,500
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−17 ,500
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1,050 1,100 1,150 1,200 1,250
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Bear call money spread
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Short at-the-money
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call
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Breakeven price on
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spread = $1,229.70
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Breakeven price on
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short call = $1,238.80
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1,300 1,350 1,400
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−15,000
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Futures price at time
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of position initiation
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FIGURE 35.19b Profi t/loss Profi le: Bear Call Money Spread (Short Call with lower Strike
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Price/long Call with Higher Strike Price); Case 2—Short At-the-Money Call/long Out-of-the-
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Money Call with Comparison to Short At-the-Money Call |