46 lines
1.4 KiB
Plaintext
46 lines
1.4 KiB
Plaintext
505
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OPTION TrAdINg STrATegIeS
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to realize a profi t, the futures price (as of the time of the option expiration) must penetrate the strike
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price by an amount greater than the premium ($10.10/oz in the above example). Note that in the
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out-of-the-money put position, price decreases that leave futures above the option strike price will
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still result in a maximum loss on the option. The long out-of-the-money put might be a particularly
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appropriate position for the trader expecting a large price decline, but also concerned about the pos-
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sibility of a large price rise.
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tabLe 35.5b profit/Loss Calculations: Long put (Out-of-the-Money)
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(1) (2) (3) (4) (5)
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Futures price at
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expiration ($/oz)
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premium of august $1,100
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put at Initiation ($/oz)
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$ amount of
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premium paid
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Value of put
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at expiration
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profit/Loss on
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position [(4) – (3)]
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1,000 10.1 $1,010 $10,000 $8,990
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1,050 10.1 $1,010 $5,000 $3,990
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1,100 10.1 $1,010 $0 –$1,010
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1,150 10.1 $1,010 $0 –$1,010
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1,200 10.1 $1,010 $0 –$1,010
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1,250 10.1 $1,010 $0 –$1,010
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1,300 10.1 $1,010 $0 –$1,010
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1,350 10.1 $1,010 $0 –$1,010
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1,400 10.1 $1,010 $0 –$1,010
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Price of August gold futures at option expiration
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Futures price at time
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of position initiation
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Breakeven
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price
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= $1,089.90
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Profit/loss at expiration ($)
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1,000
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7,500
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10,000
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5,000
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−2,500
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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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Strike price
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FIGURE 35.5b Profi t/loss Profi le: long Put (Out-of-the-Money) |