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    Advance Options Strategies

    Uploaded by

    Mahbubul Islam Koushick
    1. The document presents various advanced options strategies including money spreads using calls, straddles, and strangles. 2. For a money spread using calls on SBI, the break-even point is INR 1933, with maximum profit of INR 67 and maximum loss of INR 33. 3. A straddle on Tata Motors aims to benefit from a large stock price movement in either direction, with maximum loss between INR 236-264. 4. A strangle position on HUL expects the stock price to move substantially above INR 567 or below INR 513 for profits.

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    © All Rights Reserved
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    Advance Options Strategies

    Uploaded by

    Mahbubul Islam Koushick
    85 views14 pages
    1. The document presents various advanced options strategies including money spreads using calls, straddles, and strangles. 2. For a money spread using calls on SBI, the break-even point is INR 1933, with maximum profit of INR 67 and maximum loss of INR 33. 3. A straddle on Tata Motors aims to benefit from a large stock price movement in either direction, with maximum loss between INR 236-264. 4. A strangle position on HUL expects the stock price to move substantially above INR 567 or below INR 513 for profits.

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    1. The document presents various advanced options strategies including money spreads using calls, straddles, and strangles. 2. For a money spread using calls on SBI, the break-even point is INR 1933, with maximum profit of INR 67 and maximum loss of INR 33. 3. A straddle on Tata Motors aims to benefit from a large stock price movement in either direction, with maximum loss between INR 236-264. 4. A strangle position on HUL expects the stock price to move substantially above INR 567 or below INR 513 for profits.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    85 views14 pages

    Advance Options Strategies

    Uploaded by

    Mahbubul Islam Koushick
    1. The document presents various advanced options strategies including money spreads using calls, straddles, and strangles. 2. For a money spread using calls on SBI, the break-even point is INR 1933, with maximum profit of INR 67 and maximum loss of INR 33. 3. A straddle on Tata Motors aims to benefit from a large stock price movement in either direction, with maximum loss between INR 236-264. 4. A strangle position on HUL expects the stock price to move substantially above INR 567 or below INR 513 for profits.

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    © All Rights Reserved
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    FUTURES & OPTIONS

    PRESENTATION ON
    ADVANCE OPTIONS STRATEGIES

    Presented by Group - 8

    Tolani Institute of Management Studies


    MONEY SPREAD USING CALLS
     Question:

     SBI currently selling at INR 1897. There are two calls of


    it.

     1st call with an exercise price of INR 2000 at INR 15 with


    maturity date on 27th September, 2012

     2nd call with an exercise price of INR 1900 at INR 48 with


    maturity date on 27th September, 2012

    Tolani Institute of Management Studies


    Strike Price Long Call Value Short Call Value Value of the
    (INR) on 27th (INR) (INR) money spread
    September, S.P. = 1900 S.P. = 2000 (INR)
    2012
    Assumed
    1500 -48 15 -33
    1600 -48 15 -33
    1700 -48 15 -33
    1800 -48 15 -33
    1900 -48 15 -33
    2000 52 15 67
    2100 152 -85 67
    2200 252 -185 67 3

    2300 352 -285 67


    Tolani Institute of Management Studies
     Break – Even point for money spread = INR 1933

     This strategy will give maximum profit of INR 67 if strike


    price is greater than INR 1933 and will give maximum
    loss of INR 33 if strike price is less than 1933.

     This strategy will be adopted in Bullish market

     The implications of this strategy would be constant profit


    if both calls are in-the-money and constant loss if both
    calls are out-of-money.

    Tolani Institute of Management Studies


    Money Spread Using Call
    400

    300

    200

    Long Call Value


    100

    Short Call Value


    Gain/Loss 0
    1500 1600 1700 1800 1900 2000 2100 2200 2300 Value of the money
    spread
    -100

    -200

    -300

    -400
    Stock Price 5

    Tolani Institute of Management Studies


    STRADDLES

     Question:

     TATA Motors currently selling at INR 245.

     A call option with an exercise price of INR 250 at INR


    6 with maturity date on 27th September, 2012

     A put option with an exercise price of INR 250 at INR


    8 with maturity date on 27th September, 2012

    Tolani Institute of Management Studies


    Stock Price Gain from call Gain from Put Gain from the
    (INR) (INR) (INR) Straddle (INR)

    180 -6 62 56

    200 -6 42 36

    220 -6 22 16

    240 -6 2 -4

    250 -6 -8 -14

    260 4 -8 -4

    280 24 -8 16

    300 44 -8 36

    320 64 -8 56 7

    Tolani Institute of Management Studies


     The investor will make a loss as long as the TATA Motors
    share price is within the range of INR 236 to INR 264.

     If the price is below INR 236 or above INR 264, this


    strategy will result in a profit.

     The more the price moves away from INR 236 or INR
    264, the higher are the gains.

     A long straddle strategy is appropriate if an investor


    expects a large movement in the stock price but is not
    sure about the direction of the stock price.

    Tolani Institute of Management Studies


    Gain from a Straddle
    70

    60

    50

    40

    Gain from call (INR)


    30
    Gain from Put (INR)
    Gain/Loss
    Gain from the Straddle (INR)
    20

    10

    0
    180 200 220 240 250 260 280 300 320

    -10

    -20 9
    Stock Price

    Tolani Institute of Management Studies


    STRANGLES

     Question:

     HUL stock is currently trading at INR 540.

     A call option with an exercise price of INR 560, selling


    for INR 4

     A put option with an exercise price of INR 520, selling


    for INR 3.

    10

    Tolani Institute of Management Studies


    Stock Price (INR) Gain from the Gain from the Gain from the
    Long Call (INR) Long Put (INR) Strangle (INR)
    S.P. = 560 S.P. = 520

    400 -4 117 113

    440 -4 77 73

    480 -4 37 33

    520 -4 -3 -7

    560 -4 -3 -7

    600 36 -3 33

    640 76 -3 73

    680 116 -3 113 11

    Tolani Institute of Management Studies


    A Strangle is similar to a straddle in the sense
    that the investor is not sure about the direction of
    the stock price.

     Thisstrangle strategy will result in a maximum


    loss of INR 7 as long as the stock price is in the
    range of the two exercise prices.

     The investor will make a profit only if the stock


    price is below INR 513 or above INR 567.

    12

    Tolani Institute of Management Studies


    Gain from a Strangle
    140

    120

    100

    Gain from the Long


    80
    Call (INR)
    Gain from the Long
    Gain / Loss 60
    Put (INR)
    Gain from the
    40 Strangle (INR)

    20

    0
    400 440 480 520 560 600 640 680

    -20
    Stock price

    13

    Tolani Institute of Management Studies


    14

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