FINS2624 Study Guide - Midterm Guide: Straddle, Bear Spread, Bull Spread

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16 May 2018
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Options Recap quiz 2
Strategies (market outlook, profit, loss, volatility, time value vs. intrinsic value)
Strategy
1. Split function up into segments
a. Where there is a change in gradient
2. Guess the first one and assign values (0,1,-1) etc to the changes
3. Keep going
Draw:
- Long call
o Bullish outlook
- Short put
- Synthetic long stock
o Long call, short put at X
- Synthetic long split
o Short put at X, long call Y
- Bull spread
o Long call at X, short call Y
o Long put at X, short put Y
- Ratio call backspread
o Short call at X, long 2 calls Y
- Long put
o Bearish outlook
- Short call
- Synthetic short stock
- Bear spread
o Short put at X, long put Y
o short call at X, long call Y
- short straddle
o short call and short put at X
- short strangle
o short call Y, short put X
- long butterfly
- long straddle
o long call and long put at X
- long strangle
o long call Y and long put X
- covered call
o buy stock, short call at X
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