48 lines
1.1 KiB
Plaintext
48 lines
1.1 KiB
Plaintext
954 Appendix C
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Ratio Spread
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-Calls (Ch. 11): buy n1 calls at lower strike, s1, and sell n2 calls at higher
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strike, s2
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s1 < s2
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n1 < n2
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R = n1c1 - n2c2
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P = (s2 - s1)n1 -R
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p
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U=s 2 +--n2-n1
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Break-even cost oflong calls for follow-up action (Ch. 11)
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Break-even cost = n2(s2 - si) - R
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n2-n1
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-Puts (Ch. 24): buy n2 puts at higher strike, s2, and sell n1 puts at lower
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strike, s1
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S1 < S2
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n2 < n1
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R = n2p2 - n1p1
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P = n2(s2 - s1) - R
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p D =S1----
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n1 -n2
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Reversed-See Conversion and Reversal Profit
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Reverse Hedge (Ch. 4)-simulated straddle purchase
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General case: short m round lots of stock and long n calls
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R = m(s -x) + nc
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U=s+-R-n-m
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R D=s--m
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X
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s
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C
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current stock price
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striking price
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call price
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p put price
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r interest rate
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t = time (in years)
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B
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u
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D
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p
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R
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break-even point
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upside break-even point
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downside break-even point
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maximum profit potential
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maximum risk potential
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Subscripts indicate multiple items. For example s1, s2, s3 would designate three striking prices in a formula.
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The formulae are arranged alphabetically by title or by strategy. |