Category Archives: Derivatives
Derivatives Content List
7. Option Trading Strategies
________________________________________________________________________________

Posted on March 15, 2012 by admin in Derivatives.
Long Strangle trading strategy consists of one call and one put option positions at the same time. Here the trader buys one put option at the lower strike price (XL) and buys one call option at a higher strike price (XH). Call option premium C will be same as put option premium P. XL = […]
Continue Reading...
No Comments.

Posted on March 15, 2012 by admin in Derivatives.
Short Straddle trading strategy consists of one call and one put option positions at the same time. Here the trader sells one call and put option at the same strike price (say X) and same premium. Call option premium C will be same as put option premium P. X = USD 100; C = USD […]
Continue Reading...
No Comments.

Posted on March 15, 2012 by admin in Derivatives.
Long Straddle trading strategy consists of one call and one put option positions at the same time. Here the trader buys one call and put option at the same strike price (say X) and same premium. Call option premium C will be same as put option premium P. X = USD 100; C = USD […]
Continue Reading...
No Comments.

Posted on March 14, 2012 by admin in Derivatives.
Put Bull spread trading strategy consists of two Put option positions (One Sell and one Buy) at the same time. Here the trader sells one put option with a lower exercise price XL and buys another put option with a higher exercise price XH. For the first option he receives premium of PL and for […]
Continue Reading...
No Comments.

Posted on March 14, 2012 by admin in Derivatives.
Put Bull spread trading strategy consists of two Put option positions (One Sell and one Buy) at the same time. Here the trader buys one put option with a lower exercise price XL and sells another put option with a higher exercise price XH. For the first option he pays premium of PL and for […]
Continue Reading...
No Comments.

Posted on March 11, 2012 by admin in Derivatives.
Call Bear spread consists of two in the money call option positions (one sell and one buy) at the same time. Here the trader buys one call option with a higher exercise price XH and sells another call option with a lower exercise price XL. For the first option he pays the premium of CH […]
Continue Reading...
No Comments.

Posted on March 9, 2012 by admin in Derivatives.
Call bull spread consists of two out of the money call option positions (one sell and one buy) at the same time. Here the trader buys one call option with a low exercise price XL and sells another call option with a higher exercise price XH. For the first option he pays the premium of […]
Continue Reading...
No Comments.

Posted on March 2, 2012 by admin in Derivatives.
Protective Put consists of two positions at the same time. One is Long position on the underlying asset (suppose we bought an asset at S0 = USD 120) and buy a Put option (suppose at X= USD 100). Here strike price of the Put option should be lower than the buying price of the underlying […]
Continue Reading...
No Comments.

Posted on March 2, 2012 by admin in Derivatives.
Covered call consists of two positions at the same time. One is Long position on the underlying asset (suppose we bought an asset at S0 = USD 70) and short a call option (suppose at X= USD 100). Here strike price of the call option should be higher than the buying price of the underlying […]
Continue Reading...
No Comments.

Posted on February 6, 2012 by admin in Derivatives.
The derivative market instruments were introduced to hedge risks as well as to satisfy the speculative needs of the investors. Hedging One use of derivatives is to be used as a tool to transfer risk by taking the opposite position in the underlying asset. Suppose someone has some stocks of a particular company in his […]
Continue Reading...
No Comments.