Opções liffe orientam as estratégias de negociação

Opções de Liffe orientam estratégias de negociação
Este documento destina-se a Trading & # 013; Clientes de tecnologias que desejam criar estratégias de opções em & # 013; Liffe.
Estratégias são criadas a partir do Criar & # 013; Janela de estratégia. Existem várias maneiras de semear contratos em & # 013; a janela. Por exemplo, você pode semear contratos diretamente do Market & # 013; Explorer ou o menu de contexto do Gráfico do Mercado, clique com o botão direito do mouse. & # 013; Alternativamente, você pode arrastar e soltar contratos do Market & # 013; Grid diretamente na janela Criar Estratégia. Você pode & # 013; também use uma janela pop-up chamada Instrument Explorer, permitindo que & # 013; você para filtrar instrumentos por Mercado, Tipo de Produto, Produto, & # 013; e Instrumento. O procedimento a seguir descreve como & # 013; use o Instrument Explorer para semear instrumentos no Create & # 013; Janela de estratégia.
Criando Estratégias.
Para criar uma estratégia.
Selecione (o ícone Criar & # 013; Estratégia) no Painel de controle X_TRADER. Isso exibe & # 013; a janela Criar Estratégia.
Clique em OK para & # 013; Adicione o instrumento ao painel Criação.
Criando Outrights.
A troca Liffe permite que você crie novos direitos de autor. & # 013; Em outras palavras, você pode criar uma nova greve / expiração. Embora & # 013; X_TRADER suporta a exibição espontânea de originais recém-criados & # 013; como eles ocorrem em tempo real, você não pode criar títulos externos no X_TRADER.
Re-Criando Estratégias.
Salvando a janela Criar Estratégia & # 013; em um espaço de trabalho X_TRADER preserva suas definições de estratégia & # 013; então eles aparecem na lista de estratégias guardadas na próxima vez que você trocar.
Para recriar uma estratégia no Gateway TT.
Log & # 013; no X_TRADER e abra seu espaço de trabalho com a estratégia. Navegue até o Criar & # 013; Janela de estratégia. Destaque a estratégia em & # 013; a lista de estratégias guardadas e clique no botão Re-Create.
Nota: entre em contato com o & # 013; Gerente de conta se precisar de assistência adicional criando / recriando estratégias.
Conectar.
Segue.
Copyright © 2018 Trading Technologies International, Inc. Todos os direitos reservados.

Opções de Liffe orientam estratégias de negociação
Nome da Estratégia Liffe.
Compre Call Sell Put no mesmo & # 013; Acertar Comprar Colocar no mais alto vencer Chamada na mesma greve.
Comprar chamada Vender duas chamadas & # 013; em greves mais elevadas Compre Call at high strike.
Nota: O & # 013; as greves não precisam ser consecutivas e as lacunas entre elas e # 013; para não precisar ser igual.
Compre Put Sell two Puts & # 013; em greves mais altas Comprar colocar em ataque superior.
Nota: O & # 013; as greves não precisam ser consecutivas e as lacunas entre elas e # 013; para não precisar ser igual.
Compre Call Sell Call em & # 013; ataque mais alto Chamada de venda em greve ainda maior Compre Call & # 013; em greve ainda maior.
Nota: As greves & # 013; não precisa ser consecutivo e as lacunas entre eles não precisam & # 013; para ser igual.
Compre Put Sell Put at higher & # 013; strike Sell Put at ainda maior greve Comprar Put at yet higher & # 013; greve.
Nota: as greves não precisam de & # 013; ser consecutivo e as lacunas entre eles não precisam ser iguais.
Compre Call Sell Put no mesmo & # 013; greve Vender subjacente (insira preço subjacente)
Conversão: como & # 013; acima, mas vendem na janela de negociação.
Venda Put Buy Put and Call & # 013; em um lance mais alto, Sell Call, em uma greve ainda maior.
Nota: O & # 013; as greves não precisam ser consecutivas e as lacunas entre elas e # 013; para não precisar ser igual.
Venda Put Buy Put at higher & # 013; Acertar Comprar Chamar em um lance ainda mais alto. Ligar no Even & # 013; maior ataque.
Nota: Todas as séries devem ter a mesma data de expiração & # 013; mês.
Vender chamada Comprar colocar na mesma & # 013; Acertar em um mês próximo Comprar Chamada em um longo mês Sell Put em & # 013; mesmo ataque no amplo mês.
Nota: O preço de exercício em & # 013; o grande mês não precisa igualar o preço de exercício no próximo & # 013; mês.
Compre Call Sell Call em & # 013; mais alto vencer chamada de venda em greve ainda maior.
Nota: O & # 013; as greves não precisam ser consecutivas e as lacunas entre elas e # 013; para não precisar ser igual.
Venda Put Sell Put at higher & # 013; Acertar Comprar colocar em greve ainda maior.
Nota: O & # 013; as greves não precisam ser consecutivas e as lacunas entre elas e # 013; para não precisar ser igual.
Comprar Call Sell Call same & # 013; mês em greve superior.
Compre entre três e oito chamadas.
Nota: O & # 013; as greves e os períodos de expiração não precisam ser iguais, mas greves & # 013; e os prazos de validade devem ser inscritos em ordem ascendente.
Compre entre três e oito pontos.
Nota: O & # 013; as greves e os períodos de expiração não precisam ser iguais, mas greves & # 013; e os prazos de validade devem ser inscritos em ordem ascendente.
Esta é uma Conversão / Reversão padrão & # 013; estratégia, mas sem a perna subjacente.
Compre Call Sell & # 013; Coloque na mesma greve.
Conversão: conforme acima, mas venda em & # 013; janela de negociação.
Conectar.
Segue.
Copyright © 2018 Trading Technologies International, Inc. Todos os direitos reservados.

O Guia Opções & Futuros.
Aprenda a negociação de opções e você pode lucrar com qualquer condição de mercado. Compreenda como negociar o mercado de opções usando a ampla gama de estratégias de opções.
Descubra novas oportunidades de negociação e as várias formas de diversificar sua carteira de investimentos com futuros básicos e financeiros.
Para ajudá-lo em seu caminho para a compreensão do mundo complexo de derivativos financeiros, oferecemos um recurso abrangente de educação para negociação de futuros e opções que inclui tutoriais, dicas e conselhos detalhados aqui no Guia de opções.
Gráficos de lucro são representações visuais dos possíveis resultados das estratégias de opções. O lucro ou a perda são representados graficamente no eixo vertical enquanto o preço do estoque subjacente na data de validade é representado graficamente no eixo horizontal.
Fundamentos das opções:
Antes de começar as opções de negociação, você deve saber o que é exatamente uma opção de compra de ações e entender os dois tipos básicos de contratos de opções - coloca e chamadas. Saiba como funcionam e como trocá-los por lucros. [Consulte Mais informação. ]
Fundamentos das opções binárias:
A negociação de opções binárias está rapidamente a ganhar popularidade desde a sua introdução em 2008. Confira nosso guia completo para trocar opções binárias. [Consulte Mais informação. ]
Estratégia para iniciantes:
A chamada coberta é uma estratégia de negociação de opção popular que permite que um acionista ganhe renda adicional vendendo chamadas contra a retenção de seu estoque. [Consulte Mais informação. ]
Conselho de opção de ações:
Comprar straddles é uma ótima maneira de jogar ganhos. Muitas vezes, a diferença de preço das ações para cima ou para baixo seguindo o relatório de ganhos trimestrais, mas muitas vezes, a direção do movimento pode ser imprevisível. Por exemplo, uma venda pode ocorrer mesmo que o relatório de ganhos seja bom se os investidores esperassem excelentes resultados. [Consulte Mais informação. ]
Opção Opção Conceitos básicos de negociação:
Para o investidor de curto a médio prazo, o investimento em opções de ações fornece um conjunto adicional de opções de investimento para permitir que ele use melhor seu capital de investimento. [Consulte Mais informação. ]
Conceitos Avançados:
Quando as opções de negociação, você encontrará o uso de certos alfabetos gregos, como delta ou gamma, ao descrever riscos associados a várias posições de opções. Eles são conhecidos como "os gregos". [Consulte Mais informação. ]
Conselho de troca de opções:
Muitos comerciantes de opções tendem a ignorar os efeitos das taxas de comissão em seus lucros ou prejuízos globais. É fácil esquecer a taxa de comissão mínima de US $ 15 quando todo comércio lucrativo mata US $ 500 ou mais. Heck, é apenas 3% certo. [Consulte Mais informação. ]
Guia de Opções de Ações:
Os dividendos em dinheiro emitidos por ações têm grande impacto nos preços das opções. Isso ocorre porque o preço do estoque subjacente deve cair pelo valor do dividendo na data do ex-dividendo. [Consulte Mais informação. ]
Conceitos Avançados:
Saiba mais sobre a proporção de apontar, a forma como ela é derivada e como ela pode ser usada como um indicador contrário. [Consulte Mais informação. ]
Conceitos Avançados:
Outra maneira de jogar o mercado de futuros é através de opções de futuros. O uso de opções para negociar futuros oferece alavancagem adicional e abre mais oportunidades de negociação para o comerciante experiente. [Consulte Mais informação. ]
Conselho de opção de ações:
As opções de negociação do dia podem ser uma estratégia bem sucedida e rentável, mas há algumas coisas que você precisa saber antes de usar começar a usar opções para o dia comercial. [Consulte Mais informação. ]
Opções de ações Tutorial:
Se você é muito otimista em um estoque específico para o longo prazo e está procurando comprar o estoque, mas sente que está um pouco sobrevalorizado no momento, então você pode querer considerar escrever opções no estoque como um meio para adquiri-lo em um desconto. [Consulte Mais informação. ]
Guia de Opções de Ações:
Para obter retornos mais altos no mercado de ações, além de fazer mais lição de casa nas empresas que deseja comprar, muitas vezes é necessário assumir maior risco. Uma maneira mais comum de fazer isso é comprar ações na margem. [Consulte Mais informação. ]
Tutorial de opções de ações:
Algumas ações pagam dividendos generosos a cada trimestre. Você qualifica o dividendo se você estiver segurando as ações antes da data do ex-dividendo. [Consulte Mais informação. ]
Siga-nos no Facebook para obter estratégias diárias e amp; Dicas!
Opções básicas.
Futures Basics.
Estratégias Bullish.
Estratégias baixistas.
Estratégias neutras.
Posições sintéticas.
Opções Arbitrage.
Aviso de Risco: as ações, futuros e negociação de opções binárias discutidas neste site podem ser consideradas Operações de Negociação de Alto Risco e sua execução pode ser muito arriscada e pode resultar em perdas significativas ou mesmo em uma perda total de todos os fundos em sua conta. Você não deve arriscar mais do que você pode perder. Antes de decidir comercializar, você precisa garantir que compreenda os riscos envolvidos levando em consideração seus objetivos de investimento e nível de experiência. As informações contidas neste site são fornecidas apenas para fins informativos e educacionais e não se destinam a ser um serviço de recomendação comercial. TheOptionsGuide não será responsável por erros, omissões ou atrasos no conteúdo, ou por quaisquer ações tomadas com base nisso.
Os produtos financeiros oferecidos pela empresa possuem alto nível de risco e podem resultar na perda de todos os seus fundos. Você nunca deve investir dinheiro que não pode perder.

Opcional Estratégia Finder.
Um grande número de estratégias de negociação de opções estão disponíveis para o comerciante de opções. Use o mecanismo de pesquisa abaixo para localizar rapidamente as melhores estratégias de opções com base em sua visão das características de risco / recompensa subjacentes e desejadas.
Siga-nos no Facebook para obter estratégias diárias e amp; Dicas!
Estratégias de opções.
Opções básicas.
Aviso de Risco: as ações, futuros e negociação de opções binárias discutidas neste site podem ser consideradas Operações de Negociação de Alto Risco e sua execução pode ser muito arriscada e pode resultar em perdas significativas ou mesmo em uma perda total de todos os fundos em sua conta. Você não deve arriscar mais do que você pode perder. Antes de decidir comercializar, você precisa garantir que compreenda os riscos envolvidos levando em consideração seus objetivos de investimento e nível de experiência. As informações contidas neste site são fornecidas apenas para fins informativos e educacionais e não se destinam a ser um serviço de recomendação comercial. TheOptionsGuide não será responsável por erros, omissões ou atrasos no conteúdo, ou por quaisquer ações tomadas com base nisso.
Os produtos financeiros oferecidos pela empresa possuem alto nível de risco e podem resultar na perda de todos os seus fundos. Você nunca deve investir dinheiro que não pode perder.

Opções do LIFFE 107297 - LIFFE Escolha um guia para negociação.
Clique para editar os detalhes do documento.
Pré-visualização de texto não formatado: LIFFE Opções de um guia para estratégias de negociação © LIFFE 2002 Todos os direitos de propriedade e interesse nesta publicação devem ser adquiridos na Administração e Gestão do LIFFE ("LIFFE") e todos os outros direitos incluindo, mas sem limitação, patente, design registrado , a marca de direitos autorais, marca registrada, marca de serviço, relacionada com esta publicação também será adquirida no LIFFE. LIFFE CONNECT ™ é uma marca comercial da LIFFE Administration and Management. Nenhuma parte desta publicação pode ser redistribuída ou reproduzida de qualquer forma ou por qualquer meio ou usada para realizar qualquer trabalho derivado (como tradução, transformação ou adaptação) sem permissão por escrito da LIFFE. O LIFFE reserva-se o direito de revisar esta publicação e de fazer alterações de conteúdo de tempos em tempos sem a obrigação da LIFFE de notificar essa revisão ou alteração. Embora tenham sido tomadas todas as medidas razoáveis ​​para garantir que as informações contidas nesta publicação sejam precisas e não sejam enganosas no momento da publicação, a LIFFE não será responsável (exceto na medida exigida por lei) para o uso das informações aqui contidas. decorrentes de qualquer circunstância relacionada com negociação real ou de outra forma. Nem LIFFE, nem seus servidores nem agentes, são responsáveis ​​por quaisquer erros ou omissões contidos nesta publicação. Esta publicação é apenas para informação e não constitui uma oferta, solicitação ou recomendação para adquirir ou alienar qualquer investimento ou se envolver em qualquer outra transação. Todas as informações, descrições, exemplos e cálculos contidos nesta publicação são apenas para orientação e não devem ser tratados como definitivos. A LIFFE reserva-se o direito de alterar qualquer uma das suas regras ou especificações do contrato, e tal evento pode afetar a validade das informações nesta publicação. Aqueles que desejam negociar os contratos de futuros e opções da LIFFE, ou para oferecê-los e vendê-los para outros, devem estabelecer a posição regulamentar na jurisdição relevante antes de fazê-lo. FLEX® é uma marca registrada do Chicago Board Options Exchange Inc e foi licenciado para uso pelo LIFFE. & quot; FTSE & quot; e "Footsie" são marcas registradas da London Stock Exchange Limited e The Financial Times Limited e são utilizadas pela FTSE International Limited sob licença. & quot; € Stars & quot; é uma marca registrada da FTSE International Limited. & quot; Eurotop & quot; é uma marca comercial da Euronext NV ou de suas subsidiárias (& quot; Euronext & quot;) e é utilizada pela FTSE International Limited sob licença. O índice FTSE Eurotop 100 é o interesse próprio da Euronext e da FTSE International Limited. Todos os direitos autorais sobre os valores dos índices e as listas constituintes se acumulam em Euronext e FTSE International Limited em conjunto. O índice FTSE 100, o índice FTSE 250, o índice FTSE Eurotop 300, o índice FTSE Eurotop 300 (Ex UK), o FTSE Euro 100 Index eo Índice FTSE € Stars são propriedade do FTSE International Limited e foram licenciados para uso por LIFFE. Todos os direitos autorais nos valores do índice e nas listas de constituintes são adquiridos na FTSE International Limited. A Euronext e a FTSE International Limited, de forma alguma, patrocinam, endossam ou estão de outra forma envolvidas na emissão e oferta de produtos LIFFE e não aceitam qualquer responsabilidade em relação à negociação de produtos LIFFE. O índice MSCI Euro e o índice MSCI Pan-Euro (os "índices") são marcas de serviço da Morgan Stanley Capital International Inc. ("MSCI"). As marcas de serviço foram licenciadas pela MSCI para uso da LIFFE. Nenhum contrato de câmbio no índice MSCI Euro e MSCI Pan-Euro Index é patrocinado, garantido ou aprovado pela MSCI. O MSCI não faz representações quanto à conveniência de usar esses Contratos de Câmbio. O MSCI não faz nenhuma representação quanto à exatidão ou integridade dos Índices ou a qualquer parte de seus dados constituintes. A MSCI não oferece garantia quanto à finalidade ou a qualquer uso a que os índices ou contratos de câmbio possam ser colocados ou quanto à validade ou não das informações publicadas pela Bolsa em relação a qualquer aspecto dos contratos celebrados nos termos desse um Contrato de Câmbio. Sem limitar qualquer dos elementos acima mencionados, em nenhum caso a MSCI terá qualquer responsabilidade por danos diretos, indiretos, especiais ou consequentes, incluindo qualquer perda de lucro. Swapnote® é uma marca registrada da ICAP plc e foi licenciado para uso pelo LIFFE. O design e o algoritmo do contrato Swapnote® são protegidos por patente (US 6.304.858 B1), de propriedade da Adams, Viner e Mosler Ltd. ("AVM") e é licenciada exclusivamente para o LIFFE em todo o mundo. Índice Página Introdução Contratos de opções LIFFE 3 Estratégias reconhecidas 5 Teoria das opções básicas 7 Notas sobre a construção da estratégia 10 Estratégias Opções LIFFE 1. Chamada Longa 11 2. Chamada curta 12 3. Larga Posição 13 4. Posição curta 14 5. Distribuição longa de chamadas 15 6. Short Put Spread 16 7. Short Call Dpread 17 8 Long Put Spread 18 9. Long Combo 19 10. Short Combo 20 11. Long Straddle 21 12. Short Straddle 22 13. Long Strangle 23 14. Short Strangle 24 15. Long Guts 25 16. Manadas curtas 26 17. Folhas de manteiga longa 27 18. Folhas de manteiga curtas 28 19. Condor longo 29 20. Condor curto 30 21. Folha de manteiga de ferro comprida 31 22. Folha de manteiga de ferro curto 32 23. Condor de ferro longo 33 1 Página 24. Condor de ferro curto 34 25. Faixa de chamada longa 35 26. Faixa de chamada curta 36 27. Faixa de rodagem longa 37 28. Fita de rodagem curta 38 29. Extensão do calendário longo 39 30. Extensão do calendário diagonal longo 40 31. Extensão do calendário de longa distância 41 32. Straddle Diagonal Longo Calendário Spread 42 33. Long Jelly Roll 43 34. Long Straddle (Calendário) Strip 45 36. Long Two by One Ratio Cal I Spread 46 37. Curto de duas por uma taxa de propagação de chamadas 47 38. Longo de duas por uma proporção de propagação 48 39. Curto de duas por uma proporção de propagação 49 40. Escada de chamada longa 50 41. Escada de chamada curta 51 42. Larga escala 52 43. Escala de colocação curta 53 44. Sustentável Longo subjacente 54 45. Corruptivo sintético subjacente 55 46. Difusão prolongada de chamadas versus colocada 56 47. Proporção curta de chamadas versus colocação 57 48. Posicionamento prolongado versus chamada 58 49. Posicionamento curto versus chamada 59 50. Long Straddle versus Call 60 51. Short Straddle versus Call 61 52. Long Straddle versus Put 62 53. Short Straddle versus Put 63 54. Long Volatility Trade 64 55. Short Volatility Trade 65 56. Conversão / Reversão 66 57. Delta Estratégias neutras 2 44 35. Long Box 67 Introdução Os eventos nos últimos anos evidenciaram a volatilidade e a incerteza que é uma característica inerente aos mercados financeiros de hoje. A extensa gama de estratégias de opções da LIFFE não só proporciona uma ampla gama de visualizações e permite aos usuários obter alavancagem, mas oferece as vantagens da execução dentro de uma única transação, permitindo spreads competitivos e taxas de transação de câmbio reduzidas. Salvo indicação em contrário, as estratégias deste guia se aplicam a todos os contratos de opções da LIFFE - sobre futuros de taxa de juros de curto prazo, títulos de dívida pública e swaps, futuros de commodities, índices de ações e ações individuais. Opções do LIFFE - um guia para estratégias de negociação mostra quando e como as estratégias de negociação de opções reconhecidas da LIFFE podem ser usadas. Cada estratégia é ilustrada com lucrativos e lucrativos, além de detalhes sobre características de decaimento e sensibilidade ao mercado. As Opções de Contratos de Opções do LIFFE estão disponíveis nos seguintes contratos LIFFE: Opções sobre futuros de taxa de juros de curto prazo Três meses de lei Euro Três meses Euro (LIBOR) Três meses Euroswiss Opções sobre futuros de obrigações do governo Bond do governo alemão (Bund) Long Gilt Opções sobre os swapnote® futuros de dois anos Euro Swapnote® de dois anos Swapnote® de cinco anos Opções de swapnote® de dez anos em índices FTSE 100 (estilo americano) FTSE 100 (estilo europeu) FTSE 100 FLEX® FTSE Eurotop 100 MSCI Euro MSCI Opções de opções de capital individual Pan-Euro em futuros não financeiros Cacau Robusta Café Branco Trigo de açúcar 3 Opções de série Opções de série LIFFE são opções de expiração mensal curtas. Estes têm o benefício de prémios mais baixos, podem ser utilizados como uma ferramenta de precisão para cobertura de exposições gama, vega e theta e, além disso, oferecem oportunidades de negociação de spread contra opções mais antigas. O exercício de uma opção de prazo de validade de série resultará na cessão de uma posição de futuro no mês de entrega trimestral próximo (por exemplo, o exercício de uma opção em série de julho resultará na cessão de uma posição de futuros de setembro). As opções de série estão disponíveis nos seguintes contratos LIFFE: Futuro do governo alemão (Bund) Futuro de longo prazo Três meses Euribor futuro Euro Swapnote® de dois anos Swapnote® de cinco anos Opções de curvatura média Euro Swapnote® de dez anos LIFFE Mid-Curve as opções são opções de curto prazo com um contrato de futuros com prazo mais longo (mês vermelho) como o ativo subjacente. Proporcionando uma exposição mais longa do que as opções de baunilha LIFFE, as opções de Curva Média mostram maior volatilidade implícita, maior deterioração do tempo e maior vega do que suas contrapartes tradicionais de opções de longa data. Além disso, as opções de Curva Média exigem menos opções premium do que as mais antigas e geralmente exibem uma gama e uma gama mais altas. As opções de médio prazo da LIFFE estão disponíveis com ciclos de validade de março, junho, setembro e dezembro com dois meses em série, de modo que quatro meses de vencimento estão disponíveis para negociação, sendo os três meses de vencimento mais próximos meses consecutivos. As opções de meio-curvatura de um ano estão disponíveis nos seguintes contratos de futuros LIFFE: Três meses de euros (EURIBOR) Três meses de libras esterlinas 4 Estratégias reconhecidas As estratégias reconhecidas da LIFFE são qualificadas para reduções de taxas de transação. Todos os componentes da estratégia devem ser reservados em uma única conta. O LIFFE não permite que a amalgamação de negócios de diferentes clientes compense um lado do comércio. Estratégias de opção somente As seguintes estratégias são compostas apenas por componentes de opção: LIFFE TRS CONNECT ™ estratégia código estratégico código Chamar (colocar) Distribuir DD Combo JJ Straddle SS Strangle KK Guts GG Manteiga fl e BB Condor WW Iron Butter flie II Iron Condor w 5 Call Strip MM Put Strip MM Calendário Spread EE Diagonal Calendário Spread FF Straddle Calendário Spread NN Diagonal Straddle Calendário Spread PP Jelly Roll AA Straddle Strip MM Box XX Two by One Ratio Call (Put) Hpread HH Ladder LL Synthetic Subjacente rr Call Spread vs Put x 1 Put Spread vs Chamada y 3 Straddle vs Call (Put) z 7 5 Estratégias Neutrais Delta Além das estratégias acima, o LIFFE permite que as opções e os futuros sejam combinados em uma única estratégia, negociada através do LIFFE CONNECT ™. Para opções de equivalência patrimonial, as opções são combinadas com uma negociação da ação subjacente ou, em alternativa, a opção pode ser combinada com uma negociação no contrato Universal Stock Futures, quando esta estiver disponível. As estratégias de neutralidade delta disponíveis são: LIFFE Volatility Trade Conversion / Reversal Call (Put) Spread vs subjacente Straddle vs Subjacente Ladder vs Subjacente Combo vs Underlying Calendário Spread vs Undery Subjacente Dois por uma relação spread vs Subjacente Call Spread vs Put vs Subjacente Put Spread vs Call vs Subjacente ao código de estratégia de estratégia 6 TRS CONNECT ™ VR código dsajehcp VRVVVVVVVV Teoria das opções básicas In, out and of-money Uma opção de compra é in-the-money quando o preço subjacente é maior do que o preço de exercício da opção e está fora - do-dinheiro quando o preço subjacente for inferior ao preço de exercício da opção. Uma opção de venda é in-the-money quando o preço subjacente é menor do que o preço de exercício da opção e é fora do dinheiro quando o preço subjacente for maior do que o preço de exercício da opção. Uma opção é ao dinheiro quando o preço subjacente é igual ao preço de exercício da opção. Na prática, a opção com o preço de exercício mais próximo do preço subjacente prevalecente é chamada de opção no dinheiro. Valor intrínseco e horário O preço da opção, ou premium, pode ser considerado como a soma de dois elementos específicos: valor intrínseco e valor do tempo. Valor intrínseco O valor intrínseco de uma opção é o valor que um detentor de opção pode realizar ao exercer a opção imediatamente. O valor intrínseco é sempre positivo ou zero. Uma opção fora do dinheiro tem zero valor intrínseco. Valor intrínseco da opção de compra no dinheiro = preço do produto subjacente - preço de exercício Valor intrínseco da opção de venda no dinheiro = preço de exercício - preço do produto subjacente Valor de tempo O valor do tempo de uma opção é o valor acima do valor intrínseco que o mercado coloca na opção. Pode ser considerado como o valor da exposição contínua ao movimento no preço do produto subjacente que a opção fornece. O preço que o mercado coloca neste valor de tempo depende de uma série de fatores: prazo de caducidade, volatilidade do preço do produto subjacente, taxas de juros livres de risco e dividendos esperados. Tempo de expiração O tempo tem valor, uma vez que, quanto mais tempo a opção tem para ir até expirar, mais oportunidades há para que o preço subjacente se mova para um nível tal que a opção se torne em dinheiro. Geralmente, quanto mais tempo expirar, maior o valor do tempo da opção. À medida que a expiração se aproxima, o valor de uma opção tende a zero e a taxa de degradação do tempo acelera. Valor do tempo curva de decaimento valor do tempo meses até expiração expiração 7 Volatilidade A volatilidade de uma opção é uma medida da propagação dos movimentos de preços do instrumento subjacente. Quanto mais volátil for o instrumento subjacente, maior será o valor do tempo da opção. Isso significará maior incerteza para o vendedor de opções que, cobrará um prémio alto para compensar. Os preços das opções aumentam à medida que a volatilidade aumenta e diminui à medida que a volatilidade cai. Efeito da volatilidade aumento / diminuição no longo lucro a longo prazo Aumento da volatilidade Diminuição da perda de volatilidade Preço subjacente Vencimento, volatilidade zero Sensibilidades de opções Ao longo desta brochura, os exemplos de estratégia referem-se às sensibilidades do mercado das opções envolvidas. Essas sensibilidades são comumente chamadas de "gregos" e estas são definidas abaixo. Delta: mede a alteração no preço da opção para uma determinada alteração no preço do subjacente e, assim, permite a exposição ao subjacente a ser determinado. O delta está entre 0 e +1 para chamadas e entre 0 e -1 para puts (assim, uma opção de chamada com um delta de 0,5 aumentará no preço por 1 tick para cada aumento de 2 pontos no subjacente). Gamma: mede a mudança no delta para uma determinada alteração no subjacente. (por exemplo, se uma opção de chamada tiver um delta de 0,5 e uma gama de 0,05, isso indica que o novo delta será 0,55 se o preço subjacente for movido para cima em um ponto completo e 0,45 se o preço subjacente se deslocar por um ponto inteiro). Theta: mede o efeito da queda do tempo em uma opção. À medida que o tempo passa, as opções perderão valor de tempo e a theta indica a extensão dessa decadência. As opções de chamada e colocação estão desperdiçando ativos e, portanto, têm uma teta negativa. Observe que a decadência das opções não é linear, pois a taxa de decadência se acelerará à medida que a opção se aproxime. Como a tabela abaixo ilustra, a teta atingirá seu valor mais alto imediatamente antes do término. Vega: mede o efeito de uma mudança na volatilidade implícita no preço de uma opção. As chamadas e colocações tendem a aumentar de valor à medida que a volatilidade aumenta, pois isso aumenta a probabilidade de a opção se mover no dinheiro. Tanto as chamadas como as colocadas terão uma vega positiva. 8 Neste folheto, as sensibilidades de mercado são exibidas para cada estratégia na forma de uma tabela com base na posição aos 30 dias para expirar. Isso mostra as sensibilidades aproximadas para quando o subjacente é no dinheiro, bem como quando o subjacente aumenta e cai. As tabelas mostram as sensibilidades de uma posição conforme descrito abaixo: +++ ++ + 0 ---- = altamente positivo = positivo = ligeiramente positivo = neutro = ligeiramente negativo = negativo = altamente negativo Abaixo da tabela de sensibilidades para cada estratégia de opção, há breves explicações sobre os movimentos nas sensibilidades das opções, incluindo descrições breves de qualquer desvio da tabela de sensibilidades que pode ocorrer (por exemplo, quando a posição está mais próxima da expiração). Observe que as tabelas de sensibilidades não se destinam a ser um guia preciso para negociação. Eles são projetados para dar uma indicação de como os movimentos no subjacente mudarão as sensibilidades globais e relativas do mercado de uma posição. Resumo das opções e dos valores "grego" dos futuros Posições das opções individuais, p. Ex. opções de chamadas longas / curtas, têm seus próprios valores "grego". A tabela abaixo resume estes valores: Mudanças de valores Delta Posição abaixo greve + chamada + em Gamma acima da greve greve ++ +++ abaixo em Theta acima da greve strike grey ++ +++ abaixo no greve greve Vega acima da greve strike strike + + - - - + + ++ acima strike + - call - - --- - --- - + ++ + - - - + colocar --- - - ++ +++ ++ - - - + ++ + - colocar +++ ++ + - --- - + ++ + - - - + futuro +++ +++ +++ n / an / an / an / um / an / an / an / an / a - futuro --- --- n / an / an / an / an / an / an / an / an / a --- 9 Partilha / paridade de chamada De particular importância com O comércio de arbitragem é o conceito de paridade de colocação / chamada. Esta é a relação que existe entre chamadas e colocações. Ele afirma que o valor de uma chamada (put) pode ser derivado do valor de uma colocação (chamada) com o mesmo preço de exercício, data de vencimento e preço subjacente. Por isso, para as opções de LIFFE em futuros: C = P + FX, onde: C = preço de compra P = preço de colocação F = preço de futuros X = preço de exercício NB. Isso pressupõe que não há custos de suporte para opções (o que é o caso da faixa atual de LIFFE de opções em futuros onde o prémio não é pago na frente). Um preço de paridade de colocação / chamada para opções avançadas premium (como as Opções do Índice FTSE 100 da LIFFE) pode ser encontrado modificando ligeiramente esta fórmula. Os negócios de arbitragem, como os apresentados neste guia, são baseados nas relações que existem entre determinadas posições usando opções e futuros. Referidos como posições sintéticas, são derivadas da paridade de chamada e, ao usar essa relação, é possível realizar arbitragem entre posições sintéticas e seu equivalente total. Notas sobre a estratégia de construção de perfis de perda / perda: os resultados de proficiência / perda são ilustrados para cada estratégia sempre que possível. O eixo vertical mostra o perfil acima da linha de equilíbrio horizontal e a perda abaixo da linha de equilíbrio. O eixo horizontal representa o preço do instrumento subjacente (aumentando da esquerda para a direita). Todos os resultados potenciais de lucro e perda na expiração são mostrados em linhas sólidas e os efeitos da decadência do tempo são ilustrados com os resultados de três meses até a expiração (linhas levemente tracejadas) e no prazo de um mês (linhas tracejadas pesadas). Deve-se notar que todos os resultados e explicações de lucro / perda não incluem custos de comissão, custos de requisitos de margem e outras despesas de execução. De fi nição de dinheiro: para os fins desses exemplos, o nível do dinheiro é considerado onde o preço subjacente é igual ao preço de exercício do contrato de opção. Para estratégias simétricas consistindo em duas greves, o nível do dinheiro é considerado o ponto médio entre os dois preços de exercício. Efeito do tempo: a estratégia da opção é analisada a partir de um ponto no tempo 30 dias após o término. Note-se que o valor de certos "gregos" pode mudar à medida que a posição se aprofunda. Para as estratégias de opções baseadas em "Calendário" (ver estratégias 29-34), o efeito da degradação do tempo é particularmente importante. 10 Estratégias de opção LIFFE 1. Chamada longa 1 mês para expirar 3 meses para expirar o preço de lucro de expiração da perda subjacente A O comércio: Compre uma chamada com um preço de exercício de (A). Expectativa de mercado: mercado de alta / volatilidade otimista. Quanto mais otimista a expectativa, mais fora do dinheiro (ataque mais elevado) a chamada comprada deve ser. A Long Call combina uma exposição limitada à descida com alta velocidade em um mercado crescente. Características de lucro e perda no vencimento: Profico: Ilimitado em um mercado crescente. Perda: Limitada ao prémio inicial. Break-even: alcançado quando o subjacente aumenta acima do preço de exercício A, pelo mesmo valor que o prémio pago para estabelecer o cargo. Sensibilidades de mercado aos 30 dias de expiração: subjacente ao delta + ++ +++ gamma ++ +++ ++ theta - - - vega + ++ + Delta: aumenta para +1 como subjacente aumenta e a chamada se move no dinheiro. Gamma: Maior em torno do nível do dinheiro, particularmente quando a opção se aproxima do prazo de validade. Theta: o valor da posição diminuirá à medida que a opção perca o valor do tempo. Vega: o valor da posição tenderá a aumentar se a volatilidade esperada aumentar. Vega será mais alta quanto mais perto o subjacente for a greve e quanto mais tempo venha à maturidade. 11 2. Chamada curta 1 mês para expirar 3 meses para caducidade de expiração Um preço de lucro da perda subjacente O comércio: Vender uma chamada (A). Expectativa de mercado: mercado de baixa / volatilidade em baixa. O titular espera uma queda gradual no mercado e menor volatilidade. A greve ideal depende do decadência do tempo e do nível de vega; embora, em geral, quanto mais baixista a expectativa, maior será a opção vendida em dinheiro (menor greve), a fim de maximizar a renda premium. O lucro é limitado ao prémio recebido e, portanto, se a visão do mercado for mais do que moderadamente baixista, um Long Put pode render lucros maiores. Lucro & amp; Características de perda no vencimento: Lucro: Limitado ao prêmio recebido da venda da chamada. Perda: ilimitado em um mercado crescente. Break-even: atingido quando o subjacente aumenta acima do preço de exercício A, pelo mesmo valor que o prêmio recebido da venda da chamada. Sensibilidades de mercado aos 30 dias de expiração: subjacente ao delta - no valor de - - --- gama - --- - theta + ++ + vega - - - Delta: diminui para -1 como subjacente aumenta e a opção vendida se move em dinheiro. Gamma: Maior em torno do nível do dinheiro, particularmente quando a opção se aproxima do prazo de validade. Theta: o valor da posição aumentará à medida que a opção vendida perderá o valor do tempo. Vega: o valor da posição tenderá a cair se a volatilidade esperada aumentar. Vega será mais alta quanto mais perto o subjacente for a greve e quanto mais tempo venha à maturidade. 12 3. Longo Pôr 1 mês para expirar 3 meses para expirar o preço de lucro de expiração da perda subjacente A O comércio: Comprar uma venda (A). Expectativa de mercado: mercado de baixa / volatilidade de alta. Quanto mais baixista a expectativa, mais fora do dinheiro (baixo golpe) a posição comprada deve ser. A Long Put combina uma exposição limitada com altas velocidades em um mercado em queda. Características de lucro e perda no vencimento: Profico: Efetivamente ilimitado em um mercado em queda. Perda: Limitado ao prémio inicial pago. Rajabilidade: alcançado quando o subjacente cai abaixo do preço de exercício A pelo mesmo valor que o prémio pago para estabelecer o cargo. Sensibilidades de mercado aos 30 dias de expiração: subjacente ao delta de dinheiro ao ar --- - up - gamma ++ +++ ++ theta - - - vega + ++ + Delta: diminui para -1 como subjacente cai e a opção se move no dinheiro. Gamma: Maior em torno do nível do dinheiro, particularmente quando a opção se aproxima do prazo de validade. Theta: o valor da posição diminuirá à medida que a opção perca o valor do tempo. Vega: o valor da posição tenderá a aumentar se a volatilidade esperada aumentar. Vega será mais alta quanto mais perto o subjacente for a greve e quanto mais tempo venha à maturidade. 13 4. Curto Ponha 1 mês para expirar 3 meses para caducidade de expiração Um preço de lucro da perda subjacente O comércio: Venda uma venda (A). Expectativa de mercado: mercado de alta / volatilidade em baixa. O titular espera um aumento gradual no mercado com menor volatilidade. A greve ideal a ser vendida dependerá da decadência do tempo e do nível da vega, embora, em geral, quanto mais otimizada a visão, maior será a opção vendida no dinheiro (maior greve) para maximizar a renda premium. O lucro é limitado ao prêmio recebido e, portanto, se a visão do mercado for mais do que moderadamente otimista, uma longa chamada pode gerar maiores lucros. Pro fi to & amp; Características de perda no vencimento: Profico: Limitado ao prêmio recebido da venda da venda. Perda: ilimitado em um mercado em queda. Break-even: alcançado quando o subjacente cai abaixo do preço de exercício A pelo mesmo valor que o prêmio recebido da venda da colocação. Sensibilidades de mercado aos 30 dias de expiração: subjacente ao delta +++ ++ + gamma - --- - theta + ++ + vega - - - Delta: aumenta para +1 como subjacente cai e a opção vendida se move em dinheiro. Gamma: maior em torno do dinheiro e próximo prazo de validade. Theta: o valor da posição aumentará à medida que a opção vendida perderá o valor do tempo. Vega: o valor da posição diminuirá conforme a volatilidade esperada aumentar. Vega será mais alta quanto mais perto o subjacente for a greve e quanto mais tempo venha à maturidade. 14 5. Expansão de chamadas longas 1 mês para expirar 3 meses para caducidade de expiração B preço de lucro da perda subjacente Um código de estratégia LIFFE CONNECT ™: D. O comércio: Compre uma chamada (A), venda uma chamada em maior greve (B). Expectativa do mercado: Mercado de alta / volatilidade neutra. O spread tem a vantagem de ser mais barato estabelecer que a compra de uma única chamada, já que o prémio recebido da chamada vendida reduz o custo total. O spread oferece um potencial de lucro limitado se o subjacente aumenta e uma perda limitada se o subjacente cair. Características de lucro e perda no vencimento: Profico: Limitado à diferença entre as duas greves, menos o custo do prémio líquido. O lucro máximo ocorre onde o subjacente aumenta para o nível do maior ataque B ou superior. Perda: Limitado a qualquer prémio inicial pago no estabelecimento do cargo. A perda máxima ocorre quando o subjacente cai para o nível da greve inferior A ou abaixo. Break-even: alcançado quando o subjacente está acima da greve A pelo mesmo montante que o custo líquido de estabelecer a posição. Sensibilidades de mercado aos 30 dias de expiração: subjacente ao delta + ++ + gama + 0 - theta - 0 + vega + 0 - Delta: o nível mais alto será entre as greves A-B. Abaixo da greve A ou acima da greve B, o delta tenderá a cair em direção a zero. Gamma: Positivo, se subjacente ao ataque A, negativo se subjacente ao ataque B, neutro se em torno do ponto médio A-B. Theta: Negativo se subjacente mais perto de atacar A, positivo se subjacente ao ataque B, neutro se ao redor do ponto médio A-B. Vega: Positivo, se subjacente ao ataque A, negativo se subjacente ao ataque B, neutro se estiver no meio do ponto A-B. NB O longo intervalo de propagação e a propagação curta colocam posições quase idênticas. 15 6. Curto Put Spread 1 mês para expirar 3 meses para expiração prazo B preço de lucro da perda subjacente Um código de estratégia LIFFE CONNECT ™: D. O comércio: Vender um put (B), comprar colocar em uma greve inferior (A). Expectativa do mercado: Mercado de alta / volatilidade neutra. O Short Put em B pretende aproveitar um mercado de alta e o prémio adquirido oferece alguma proteção contra desvantagem com um Long Put em A. O spread oferece um potencial de lucro limitado se o subjacente aumenta e uma perda limitada se o subjacente cair. Características de lucro e perda no vencimento: Profico: Limitado ao crédito premium líquido. O lucro máximo ocorre quando o subjacente aumenta para o nível da greve mais elevada B ou superior. Perda: perda máxima ocorre onde o subjacente cai para o nível da greve inferior A ou abaixo. Break-even: alcançado quando o subjacente está abaixo da greve B pelo mesmo valor que o crédito líquido de estabelecer a posição. Sensibilidades de mercado aos 30 dias de expiração: subjacente ao delta + ++ + gama + 0 - theta - 0 + vega + 0 - Delta: o nível mais alto será entre as greves A-B. Abaixo da greve A ou acima da greve B, o delta tenderá a cair em direção a zero. Gamma: Positivo, se subjacente mais perto do ataque A, negativo se subjacente ao ataque B, neutro se no meio do ponto A-B. Theta: Negativo se subjacente mais perto de atacar A, positivo se subjacente ao ataque B, neutro se em torno do ponto médio de A-B. Vega: Positivo, se subjacente ao ataque A, negativo se subjacente ao ataque B, neutro se estiver no meio do ponto A-B. 16 7. Distribuição de chamadas curtas 1 mês para expirar 3 meses para expirar o lucro de expiração Um preço da perda subjacente B LIFFE CONNECT ™ Código de estratégia: D. O comércio: Vender uma chamada (A), comprar chamada em maior greve (B). Expectativa do mercado: Mercado de baixa - bilidade / volatilidade neutra. O Short Call at A pretende aproveitar um mercado de baixa e o prémio adquirido oferece alguma proteção para cima com um Long Call em B. O spread oferece um lucro limitado se o subjacente cair e uma exposição de perda limitada se o subjacente aumentar. Pro fi to & amp; Características de perda no vencimento: Profico: Limitado ao crédito premium líquido. O lucro máximo ocorre quando o subjacente cai para o nível da greve inferior A ou abaixo. Perda: Limitada à diferença entre as duas greves menos o crédito líquido recebido no estabelecimento do cargo. A perda máxima ocorre onde o subjacente aumenta para o nível da greve mais elevada B ou superior. Break-even: alcançado quando o subjacente está acima do preço de exercício A pelo mesmo valor que o crédito líquido de estabelecer o cargo. Sensibilidades de mercado aos 30 dias de expiração: subjacente ao delta - - - gama - 0 + theta + 0 - vega - 0 + Delta: o nível mais alto será entre as greves A-B. Abaixo da greve A ou acima da greve B, o delta tenderá a cair em direção a zero. Gamma: Negative if underlying closer to strike A, positive if underlying closer to strike B, neutral if around midpoint of A-B. Theta: Positive if underlying closer to strike A, negative if underlying closer to strike B, neutral if around midpoint of A-B. Vega: Negative if underlying closer to strike A, positive if underlying closer to strike B, neutral if around midpoint of A-B. NB: The Short call spread and the long put spread create near identical positions. 17 8. Long Put Spread 1 month to expiry 3 months to expiry expiry profit A price of underlying loss B LIFFE CONNECT™ Strategy code: D. The trade: Buy a put (B), sell put at lower strike (A). Market expectation: Market bearish/volatility neutral. The spread has the advantage of being cheaper to establish than the purchase of a single put, as the premium received from the sold put reduces the overall cost. The spread offers a limited loss exposure if the underlying rises, and a limited profit if the underlying falls. Profit & loss characteristics at expiry: Profit: Limited to the difference between the two strikes minus net premium cost. Maximum profit occurs where underlying falls to the level of the lower strike A or below. Loss: Limited to the initial premium paid in establishing the position. Maximum loss occurs where the underlying rises to the level of the higher strike B or above. Break-even: Reached when the underlying is below strike price B by the same amount as the net cost of establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta - -- - gamma - 0 + theta + 0 - vega - 0 + Delta: The highest level will be between the strikes A-B. Below strike A or above strike B, the delta will tend to fall towards zero. Gamma: Negative if underlying closer to strike A, positive if underlying closer to strike B, neutral if around midpoint of A-B. Theta: Positive if underlying closer to strike A, negative if underlying closer to strike B, neutral if around midpoint of A-B. Vega: Negative if underlying closer to strike A, positive if underlying closer to strike B, neutral if around midpoint of A-B. 18 9. Long Combo 1 month to expiry 3 months to expiry expiry profit B price of underlying A loss LIFFE CONNECT™ Strategy code: J. The trade: Sell a call (B), buy put at lower strike (A). Has same profile as synthetic split strike short future. Market expectation: Market bearish/volatility neutral. The risk/reward profile is similar to that of a short future except that there is a plateau (A-B) over which there will be no change in profit/loss. The plateau makes this a more suitable trade than a short future if volatility expectations are uncertain. Profit & loss characteristics at expiry: Profit: Unlimited in a falling market. Loss: Unlimited in a rising market. Break-even: Depending on the strikes chosen, the position may yield a small premium cost or credit. If the position is established at a net cost, break-even will occur where the market falls below point A by the same amount. If the position is established at a credit, break-even will occur where the market rises above point B by the same amount. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta - - - gamma + 0 - theta - 0 + vega + 0 - Delta: The further the position from A or B, the nearer the delta will be towards -1. Gamma: Positive at A, negative at B, neutral around midpoint of A-B. Theta: Slightly negative at A, slightly positive at B, neutral around midpoint of A-B. Vega: Slightly positive at A, slightly negative at B, neutral around midpoint of A-B. 19 10. Short Combo 1 month to expiry 3 months to expiry expiry profit A price of underlying B loss LIFFE CONNECT™ Strategy code: J. The trade: Buy a call (B), sell put at lower strike (A). Same profile as synthetic split strike long future. Market expectation: Market bullish/volatility neutral. The risk/reward profile is similar to that of a long future except that there is a plateau (A-B) in which there is no change in profit/loss. The plateau makes this a more suitable trade than a long future if volatility expectations are uncertain. Profit & loss characteristics at expiry: Profit: Unlimited in a rising market. Loss: Unlimited in a falling market. Break-even: Depending on the strikes chosen, establishing the position may yield a small premium cost or credit. If the position is created at a cost, break-even will occur where the market rises above point B by this amount. If the position is established at a credit, the break-even point will occur if the market falls below point A by the same amount. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta + + + gamma - 0 + theta + 0 - vega - 0 + Delta: The further the position is from A or B, the nearer the delta will move towards +1. Gamma: Negative at A, positive at B, neutral around midpoint of A-B. Theta: Slightly positive at A, slightly negative at B, neutral around the mid point A-B. Vega: Slightly negative at A, slightly positive at B, neutral around midpoint of A-B. 20 11. Long Straddle 1 month to expiry 3 months to expiry expiry profit price of underlying ATM loss A LIFFE CONNECT™ Strategy code: S. The trade: Buy a put (A), buy call at same strike. Market expectation: Market neutral/volatility bullish. With the underlying at A and an unknown directional move or increase in volatility is anticipated. Profit & loss characteristics at expiry: Profit: Unlimited for an increase or decrease in the underlying. Loss: Limited to the premium paid in establishing the position. Will be greatest if the underlying is at strike A, at expiry. Break-even: Reached if the underlying rises or falls from strike A by the same amount as the premium cost of establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta -- 0 ++ gamma ++ +++ ++ theta - --- - vega + ++ + Delta: Neutral (assumed at-the-money position), becomes highly positive (negative) for large increases (decreases) in underlying. As a volatility trade, the position would be kept delta neutral with dynamic hedging until it is closed out or is altered to take account of a clear change of market direction. Gamma: Highest when at-the-money and approaching expiry. Theta: Value of position will decrease as the options lose time value. Theta may be positive if the position is far in-the-money and/or close to expiry. Vega: Value of position will increase as expected volatility increases. 21 12. Short Straddle 1 month to expiry 3 months to expiry expiry A profit price of underlying ATM loss LIFFE CONNECT™ Strategy code: S. The trade: Sell a put (A), sell call at same strike. Market expectation: Market neutral/volatility bearish. With the underlying at A and a period of low or decreasing volatility is anticipated, and the underlying is not expected to move dramatically. Profit & loss characteristics at expiry: Profit: Limited to the credit received from establishing the position. Highest if the market settles at A. Loss: Unlimited for both an increase or decrease in the underlying. Break-even: Reached if the underlying rises or falls from strike A by the same amount as the premium received from establishing the position. Market sensitivity at 30 days to expiry: underlying down at-the-money up delta ++ 0 -- gamma -- --- -- theta + +++ + vega - -- - Delta: Neutral (presumed at-the-money position), becomes highly negative (positive) for large increases (decreases) in the underlying. As a volatility trade, the position would be kept delta neutral with dynamic hedging until it is closed out or is altered to take account of a clear change of market direction. Gamma: Highest when at-the-money and approaching expiry. Theta: Value of position will increase as the options lose time value. Theta may be negative if the position is far out-of-the-money and/or close to expiry. Vega: Value of position will decrease as expected volatility increases. 22 13. Long Strangle 1 month to expiry 3 months to expiry expiry profit price of underlying ATM loss A B LIFFE CONNECT™ Strategy code: K. The trade: Buy a put (A), buy a call at higher strike (B). Market expectation: Market neutral/volatility bullish. The holder expects a major movement in the market but is unsure as to its direction. A larger directional move is needed than a straddle in order to yield a profit but if the market stagnates, losses will be less. Profit & loss characteristics at expiry: Profit: The profit potential is unlimited although a substantial directional movement is necessary to yield a profit for both a rise or fall in the underlying. Loss: Occurs if the market is static; limited to the premium paid in establishing the position. Break-even: Occurs if the market rises above the higher strike price at B by an amount equal to the cost of establishing the position, or if the market falls below the lower strike price at A by the amount equal to the cost of establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta -- 0 ++ gamma ++ +++ ++ theta - -- - vega + ++ + Delta: Neutral; (presumed at-the-money position), becomes highly positive (negative) for large increases (decreases) in underlying. Gamma: Will be highest at strikes A and B but will tend to decrease as the underlying falls or rises significantly. Theta: Time decay will act against the holder of the position. Vega: The position will increase in value as volatility rises. NB: Whilst the expiry profile is similar to that of the Long Guts, the difference relates to premium outlay. With the Long Strangle strategy you are buying two out of-the-money options (with a Long Guts both options are in the-money). 23 14. Short Strangle 1 month to expiry 3 month to expiry expiry profit A B price of underlying ATM loss LIFFE CONNECT™ Strategy code: K. The trade: Sell a put (A), sell call at higher strike (B). Market expectation: Direction neutral/volatility bearish. The holder expects low volatility and no major directional move. More cautious than a straddle as profit potential spans a larger range although maximum potential profits will be lower. Profit & loss characteristics at expiry: Profit: Limited to the premium received. Will be highest if the underlying remains within the market level A-B. Loss: Unlimited for a sharp move in the underlying in either direction. Break-even: reached if the underlying falls below strike A or rises above strike B by the same amount as the premium received in establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta ++ 0 -- gamma -- --- -- theta + ++ + vega - -- - Delta: Neutral (presumed at-the-money position), becomes highly negative (positive) for large increases (decreases) in the underlying. Gamma: Highest at strikes A and B but will tend to decrease as the underlying falls or rises significantly. Theta: Increase in value as options decay. Vega: Value of position will decrease as volatility increases. NB: Whilst the expiry profile is similar to that of the Long Guts, the difference relates to premium outlay. With the Long Strangle strategy you are selling two out of-the-money options (with a Long Guts both options are in the-money). 24 15. Long Guts 1 month to expiry 3 months to expiry expiry profit ATM price of underlying loss B A LIFFE CONNECT™ Strategy code: G. The trade: Buy a call (A), buy put at higher strike (B). Market expectation: Market neutral/volatility bullish. The market is at, or about the A-B range and a large directional move in the underlying is anticipated. Position has characteristics comparable to an in-the-money strangle. Profit & loss characteristics at expiry: Profit: Unlimited in a rising or falling market. A substantial directional movement is required however. Loss: Limited to the initial premium paid less the difference between A and B; occurs if the underlying remains within the range A-B. Break-even: Reached if the underlying rises above the higher strike price B by the amount equal to the cost of establishing the position less A-B, or if the underlying falls below the lower strike price A by the amount equal to the cost of establishing the position less A-B. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta -- 0 ++ gamma ++ +++ ++ theta - -- - vega + ++ + Delta: Neutral; (presumed at-the-money position). Becomes highly positive (negative) for large increases (decreases) in the underlying. Gamma: Will be highest between strikes A and B and approaching expiry. Theta: Value of position will decrease as options lose time value. Vega: Value of position will increase as implied volatility increases. NB: Whilst the expiry profile is similar to that of the Long Strangle, the difference relates to premium outlay. With the Long Guts strategy you are buying two in-the-money options (with a Long Strangle both options are out-of-the-money). 25 16. Short Guts 1 month to expiry 3 months to expiry expiry profit A B price of underlying ATM loss LIFFE CONNECT™ Strategy code: G. The trade: Sell a call (A), sell a put at higher strike (B). Market expectation: Direction neutral/volatility bearish. In this case the underlying is at, or about the A-B range and is expected to remain within this band. Profit & loss characteristics at expiry: Profit: Limited to the net premium received less the difference between A and B; occurs if the underlying remains within the range A-B. Loss: Unlimited in a rising or falling market. A substantial directional movement is required however. Break-even: Reached if the underlying falls below the lower strike price A by the amount equal to the premium received from establishing the position less A-B, or if the underlying rises above strike price B by the amount equal to the premium received from establishing the position less A-B. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta ++ 0 -- gamma -- --- -- theta + ++ + vega - -- - Delta: Neutral (presumed at-the-money position). Becomes highly negative (positive) for large increases (decreases) in the underlying. Gamma: Will be highest between strikes A and B and approaching expiry. Theta: Value of position will increase as options lose time value. Vega: Value of position will decrease as implied volatility increases. NB: Whilst the expiry profile is similar to that of the Short Strangle, the difference relates to premium outlay. With the Short Guts strategy you are selling two in-the-money options (with a Short Strangle both options are out-of-the-money). 26 17. Long Butterfly 1 month to expiry 3 months to expiry expiry profit B price of underlying ATM A time decay C loss LIFFE CONNECT™ Strategy code: B. The trade: Buy put (or call) A, sell two puts (or calls) at higher strike B, buy put (or call) at an even higher strike C. Market expectation: Direction neutral/volatility bearish. In this case, the holder expects the underlying to remain around strike B, or it is felt that there will be a fall in implied volatility. Position is less risky than selling straddles or strangles as there is a limited downside exposure. Profit & loss characteristics at expiry: Profit: Maximum profit limited to the difference in strikes between A and B minus the net cost of establishing the position. Maximised at mid strike B (assuming A-B and B-C are equal). Loss: Maximum loss limited to the net cost of the position for either a rise or a fall in the underlying. Break-even: Reached when the underlying is higher than A or lower than C by the cost of establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta + 0 - gamma - -- - theta +/- + +/- vega -/+ -- -/+ Delta: Neutral (assuming an at-the-money position). Delta becomes more positive as underlying moves to A, negative as the underlying moves to C. Gamma: Highest at or about strike B. Below strike A, or above strike C, the gamma will tend to decline. May become positive at greater distances from B. Theta: Time decay will be negligible until the final month of the contract. Decay will benefit the holder between underlying levels A and C, being greatest at B. If the underlying moves outside this area, decay will act against holder. Vega: Increased volatility will reduce the value of the position. Volatility may have a positive impact if the underlying is below A or above C by a sufficient margin. 27 18. Short Butterfly 1 month to expiry 3 months to expiry expiry profit C A ATM price of underlying loss B LIFFE CONNECT™ Strategy code: B. The trade: Sell put (or call) A, buy two puts (or calls) B, sell put (or call) C. Market expectation: Market neutral/volatility bullish. In this case the holder expects a directional move in the underlying, or a rise in implied volatility. Profit & loss characteristics at expiry: Profit: Maximum profit is the net credit received in establishing the position and will occur if there is a sufficient directional move of the underlying, in either direction. Loss: Limited to the difference in strikes between A and B, minus the net credit in establishing the position. Break-even: Reached when the underlying is higher than A or lower than C by the credit received from establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta - 0 + gamma + ++ + theta +/- - +/- vega -/+ ++ -/+ Delta: Neutral (assumed at-the-money spread). Delta becomes more positive as underlying moves to C, negative as the underlying moves to A. Gamma: Highest at or about strike B and will tend to decline as the market moves in either direction from this point. May become negative at greater distances from B. Theta: Time decay will be negligible until the final month of the contract. Decay will act against the holder between underlying levels A and C, being greatest at B. If the underlying moves outside this area, decay will benefit the holder. Vega: Increased volatility will increase the theoretical value of the position. Volatility may have a negative impact if the underlying is below A or above C by a sufficient margin. 28 19. Long Condor 1 month to expiry 3 months to expiry expiry profit B C price of underlying ATM A D loss LIFFE CONNECT™ Strategy code: W. The trade: Buy put (call) at A; sell put (call) at two higher strikes B, C; buy put (call) at yet higher strike D. Market expectation: Direction neutral/volatility bearish. A Long Condor allows for a greater degree of volatility and hence a wider band of profit potential than a Long Butterfly. Profit and loss characteristics at expiry: Profit: Maximised where the underlying settles between the two strike prices B and C, but will decline as the market rises, or falls beyond these strikes. Loss: Occurs if the underlying rises towards strike D or falls towards strike A. Will be limited to the cost of establishing the position for either a rise or a fall in the underlying. Break-even: Lower break-even point reached when underlying reaches the lower strike price A plus the cost of establishing the spread, and the higher break-even when the underlying reaches the level of the higher strike D minus the cost of establishing the spread. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta ++ 0 -- gamma - -- - theta +/- + +/- vega -/+ -- -/+ Delta: Neutral (assumed at-the-money position). Delta becomes more positive as underlying moves to A, negative as the underlying moves to D. Gamma: Highest at or about strikes B and C. Below A, or above D, gamma will begin to decline. May become positive as the underlying moves further away from the ATM position. Theta: Time decay will be negligible until the final month of the contract. Decay will benefit the holder between underlying levels A and D, being greatest between B and C. If the underlying moves outside this area, decay will act against holder. Vega: Increased volatility will act against the holder. Volatility may have a positive impact if the underlying is below A or above D by a sufficient margin. 29 20. Short Condor 1 month to expiry 3 months to expiry expiry profit D A price of underlying ATM C loss B LIFFE CONNECT™ Strategy code: W. The trade: Sell put (call) at A; buy put (call) at two higher strikes B, C; sell put (call) at yet higher strike D. Market Expectation: Direction neutral/volatility bullish. Holder expects the market to move significantly, or volatility to rise, but the direction is uncertain. A Short Condor will require a larger directional move than a butterfly in order to yield a profit. Profit & loss characteristics at expiry: Profit: Limited and will occur if the market moves above the highest strike (D) or below the lower strike at A. Loss: Maximum losses are limited and will occur if the market remains between the exercise prices B and C. Break-even: Lower break even reached when underlying reaches the lower strike price A plus the net credit received from establishing the position, and the higher breakeven when the underlying reaches the level of the higher strike price D minus the credit received from establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta -- 0 ++ gamma + ++ + theta +/- - +/- vega -/+ ++ -/+ Delta: Neutral (assumed at-the-money spread). Delta becomes more positive as underlying moves to D, negative as the underlying moves to A. Gamma: Highest between strikes B and C and will tend to decline as the market moves in either direction from this point. May become negative as the underlying moves further away from the ATM position. Theta: Time decay will be negligible until the final month of the contract. Decay will act against the holder between underlying levels B and C. If the underlying moves outside this area, decay will benefit the holder. Vega: Increased volatility will increase the theoretical value of the position. Volatility may have a negative impact if the underlying is below A or above D by a sufficient margin. 30 21. Long Iron Butterfly 1 month to expiry 3 months to expiry expiry profit C A ATM price of underlying loss B LIFFE CONNECT™ Strategy code: I. The trade: Buy Straddle, sell Strangle with strike prices above and below the strike price of the Straddle, i. e. Sell a put (A), buy a put and a call at higher strike (B), sell a call at an even higher strike (C). Market expectation: Direction neutral/volatility bullish. Holder expects a market move in either direction. The position will also benefit from an increase in volatility. Profit & loss characteristics at expiry: Profit: Limited; maximised where the underlying rises to strike C or falls to strike A. Loss: Limited to the net debit in establishing the position, greatest if underlying is at B. Break-even: Reached when underlying is above or below strike price B by the same amount as the initial debit. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta -- 0 ++ gamma + ++ + theta +/- - +/- vega -/+ ++ -/+ Delta: Neutral (assumed at-the-money). Becomes highly positive (negative) for large decreases (increases) in the underlying. Gamma: Highest at or about strike B, and will tend to decline as the market moves in either direction from this point. May become negative at greater distances from B. Theta: Time decay will be negligible until the final month of the contract. Decay will act against the holder between underlying levels A and C, being greatest at B. If the underlying moves outside this area, decay will benefit the holder. Vega: Value of position will increase as expected volatility increases. 31 22. Short Iron Butterfly 1 month to expiry 3 months to expiry expiry B profit price of underlying C A loss LIFFE CONNECT™ Strategy code: I. The Trade: Sell Straddle, buy Strangle with strike prices above and below the strike price of the Straddle, i. e. Buy put (A), sell put and call at higher strike (B), buy call at equally higher strike (C). Market expectation: Direction neutral/volatility bearish. If the underlying is at, or about strike B and is expected to remain at this level, or it is felt that volatility will fall. Profit & loss characteristics at expiry: Profit: Limited to the net credit in establishing the position. Maximised when the underlying is at B. Loss: Limited loss occurs if there is a directional move in the market. Maximised at the lower strike A, and the higher strike C. Break-even: Reached when underlying is above or below strike price B by the same amount as the net credit in establishing the position. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta ++ 0 -- gamma - -- - theta +/- + +/- vega -/+ -- -/+ Delta: Neutral (assumed at-the-money position). Gamma: Gamma will be highest at market level B and lowest if the market falls below A or rises above market level C. May become positive at greater distances from B. Theta: The position will accrue time value most rapidly at B. If the market moves outside of the A-C band, time decay will move against the holder. 32 23. Long Iron Condor D A 1 month to expiry 3 months to expiry expiry profit ATM price of underlying C B loss LIFFE CONNECT™ Strategy code: 5. The Trade: Buy strangle, sell strangle with strike prices outside those of the bought strangle, i. e. sell a put (A), buy a put at higher strike (B), buy a call at even higher strike (C), sell a call at even higher strike (D). This trade is only valid for FTSE 100 Index option contracts. Market expectation: Direction neutral/volatility bullish. Holder expects the market to move significantly, or volatility to rise, but the direction is uncertain. A Long Iron Condor will require a larger directional movement than an Iron Butterfly in order to yield a profit. Profit & loss characteristics at expiry: Profit: Limited and will occur if the market moves to or above the highest strike (D) or to or below the lowest strike (A). Loss: Maximum losses are limited and will occur if the market remains at or between the strikes B and C. Break-even: Lower break-even reached when underlying falls below strike price B by the amount of the premium paid. Upper break-even reached when underlying rises above strike price C by the amount of premium paid. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta -- 0 ++ gamma + ++ + theta +/- - +/- vega -/+ ++ -/+ Delta: Neutral (assumed at-the-money position). Delta becomes more positive as underlying moves to D, negative as the underlying moves to A. Gamma: Highest between strikes B and C and will tend to decline as the market moves in either direction from this point. May become negative as the underlying moves further away from the ATM position. Theta: Time decay will be negligible until the final month of the contract. Decay will act against the holder between B and C. If the underlying moves outside this area, decay will benefit the holder. Vega: Increased volatility will increase the theoretical value of the position. Volatility may have a negative impact if the underlying is below A or above D by a sufficient margin. 33 24. Short Iron Condor 1 month to expiry 3 months to expiry expiry C profit B ATM price of underlying loss D A LIFFE CONNECT™ Strategy code: 5 . The trade: Sell strangle, buy strangle with strike prices outside those of the sold strangle, i. e. buy a put (A), sell a put at higher strike (B), sell a call at even higher strike (C), buy a call a even higher strike (D). This trade is only valid for FTSE 100 Index option contracts. Market expectation: Direction neutral/volatility bearish. A Short Iron Condor allows for a greater degree of volatility and hence a wider band of profit potential than a Short Iron Butterfly. Profit & loss characteristics at expiry: Profit: Maximised where the underlying remains at or within the exercise prices B and C, but will decline as the market rises or falls beyond these strikes. Will be limited to the net premium received for the trade. Loss: Losses are limited, and will occur if the underlying rises to or above strike D or falls to or below strike A. Break-even: Lower break-even reached when underlying falls below strike price B by the amount of the premium received. Upper break-even reached when underlying rises above strike price C by the amount of premium received. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta ++ 0 -- gamma - -- - theta +/- + +/- vega -/+ -- -/+ Delta: Neutral (assumed at-the-money position). Delta becomes more positive as underlying moves to A, negative as the underlying moves to D. Gamma: Highest between strikes B and C and will tend to decline as the market moves in either direction from this point. May become positive as the underlying moves further away from the ATM position. Theta: Time decay will be negligible until the final month of the contract. Decay will benefit the holder between B and C. If the underlying moves outside this area, decay will act against the holder. Vega: Increased volatility will act against the holder. Volatility may have a positive impact if the underlying is below A or above D by a sufficient margin. 34 25. Long Call Strip 1 month to expiry 3 months to expiry expiry B profit price of underlying D C loss B A LIFFE CONNECT™ Strategy code: M. The trade: Buy call at strike A, buy calls at higher strike prices. Between 3 and 8 strikes may be used in total, with one call option purchased at each. In the graph above, a 4-option strip is shown. All call options must be for the same expiry month. This strategy is not available for individual equity options or commodity options. Market expectation: Direction bullish/volatility bullish. A long call strip gives the holder an increased exposure to a positive movement in the underlying price. Profit & loss characteristics at expiry: Profit: Unlimited in a rising market. Loss: Limited to the initial premium. Break-even: There will be a single break-even position, but the position in relation to the strikes will depend on the strike prices involved and the premium paid. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta + ++ +++ gamma ++ +++ ++ theta -- --- -- vega ++ +++ ++ Delta: Increases as the underlying rises. The maximum level of delta depends on the number of calls in the strip, e. g. with 4 calls, the combined delta will tend to +4 as the underlying increases. Gamma: Highest between the highest and lowest strike prices. High gamma will be focussed on the area around each strike price as the strategy approaches expiry. Theta: Time decay will act against the holder of a long call strip. Vega: The value of the position will increase as expected volatility increases. 35 26. Short Call Strip 1 month to expiry 3 months to expiry expiry B A B profit C D price of underlying loss LIFFE CONNECT™ Strategy code: M. The trade: Sell call at strike A, sell calls at higher strike prices. Between 3 and 8 strikes may be used in total, with one call option sold at each. In the graph above, a 4-option strip is shown. All call options must be for the same expiry month. This strategy is not available for individual equity options or commodity options. Market expectation: Direction neutral or bearish/volatility bearish. Profit & loss characteristics at expiry: Profit: Limited to the initial premium received. Loss: Unlimited in a rising market. Break-even: There will be a single break-even position, but the position in relation to the strikes will depend on the strike prices involved and the premium paid. Market sensitivities at 30 days to expiry: underlying down at-the-money delta - -- up --- gamma -- --- -- theta ++ +++ ++ vega -- --- -- Delta: Decreases as the underlying rises. The minimum level of delta depends on the number of calls in the strip, i. e. with 4 calls, the combined delta will tend to -4 as the underlying increases. Gamma: Highest between the highest and lowest strike prices. High gamma will be focussed on the area around each strike price as the strategy approaches expiry. Theta: Time decay will benefit the holder of a short call strip. Vega: The value of the position will decrease as expected volatility increases. 36 27. Long Put Strip 1 month to expiry 3 months to expiry expiry B profit price of underlying D C B loss A LIFFE CONNECT™ Strategy code: M. The trade: Buy put at strike A, buy puts at lower strike prices. Between 3 and 8 strikes may be used in total, with one put option purchased at each. In the graph above, a 4-option strip is shown. All put options must be for the same expiry month. This strategy is not available for individual equity options or commodity options. Market expectation: Direction bearish/volatility bullish. A long put strip gives the holder an increased exposure to a decline in the underlying price. Profit & loss characteristics at expiry: Profit: Unlimited in a falling market. Loss: Limited to the initial premium. Break-even: There will be a single break-even position, but the position in relation to the strikes will depend on the strike prices involved and the premium paid. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta --- -- - gamma ++ +++ ++ theta -- --- -- vega ++ +++ ++ Delta: Decreases as the underlying rises. The maximum level of delta depends on the number of puts in the strip - e. g. with 4 puts, the delta will tend to -4 as the underlying decreases. Gamma: Highest between the highest and lowest strike prices. High gamma will be focussed on the area around each strike price as the strategy approaches expiry. Theta: Time decay will act against the holder of a long put strip. Vega: The value of the position will increase as expected volatility increases. 37 28. Short Put Strip 1 month to expiry 3 months to expiry expiry B A profit B C price of underlying D loss LIFFE CONNECT™ Strategy code: M. The trade: Sell put at strike A, sell puts at lower strike prices. Between 3 and 8 strikes may be used in total, with one put option sold at each. In the graph above, a 4-option strip is shown. All put options must be for the same expiry month. This strategy is not available for individual equity options or commodity options. Market expectation: Direction neutral or bullish/volatility bearish. Profit & loss characteristics at expiry: Profit: Limited to the initial premium received. Loss: Unlimited in a falling market. Break-even: There will be a single break-even position, but the position in relation to the strikes will depend on the strike prices involved and the premium paid. Market sensitivities at 30 days to expiry: underlying down at-the-money delta +++ ++ up + gamma -- --- -- theta ++ +++ ++ vega -- --- -- Delta: Increases as the underlying rises. The minimum level of delta depends on the number of puts in the strip, e. g. with 4 puts, the combined delta will tend to +4 as the underlying decreases. Gamma: Highest between the highest and lowest strike prices. High gamma will be focussed on the area around each strike price as the strategy approaches expiry. Theta: Time decay will benefit the holder of a short put strip. Vega: The value of the position will decrease as expected volatility increases. 38 29. Long Calendar Spread This is a time value trade (involving the sale and purchase of options with different expiry months) and as such cannot be adequately plotted in terms of its risk/reward profile. LIFFE CONNECT™ Strategy code: E. The trade: Sell near put (call), buy far put (call) at same strike. Market expectation: Direction neutral/volatility bullish. The near term option decays faster than the longer dated option, therefore the trade benefits from an increase in volatility. Profit and loss characteristics at expiry (of near term option): The potential profit in a time value trade is derived from the time decay characteristics of options (see the description of Theta in the introduction). The near, written put (call) will decay at a rate faster than that of the far, purchased put (call) as it approaches expiry and it is this differential in the rate of time decay which may yield a profit. Assuming the options are at-the-money and the market remains at this level, the sold option will expire worthless and the purchased option, although not possessing intrinsic value, will hold time value. As the initial position is established at a loss (because the far option will command a higher premium), to yield a profit, the time value of the long option after the expiry of the short dated option must be such that its value is greater than the initial cost of establishing the position. 39 30. Long Diagonal Calendar Spread This is a time value trade (involving the sale and purchase of options with different expiry months) and as such cannot be adequately plotted in terms of its risk/reward profile. LIFFE CONNECT™ Strategy code: F. The trade: Sell near put (call), buy far put (call) at a different strike. Market expectation: Expected to profit from time-decay differential and an increase in volatility. In addition, the position is suitable for a directional view on the underlying, e. g. sell Sep 99.00 call and buy Dec 101.00 call, giving a reduced cost calendar spread trade. Profit & loss characteristics at expiry (of near option): The profitability of the trade depends upon the differing time decay characteristics of the near, sold put (call) and the far, purchased put (call). The difference between this trade and that of a Calendar spread is that a diagonal spread involves options with different strike prices. As with a Calendar spread, the maximum loss will occur if the near, sold call (put) moves in-the-money and is exercised, followed by a fall (rise) in the market rendering the purchased call (put) worthless on expiry. 40 31. Long Straddle Calendar Spread This is a time value trade (involving the simultaneous sale and purchase of straddles with different expiry months but same strikes), and as such cannot be adequately plotted in terms of its risk/reward profile. LIFFE CONNECT™ Strategy code: N. The Trade: Sell Straddle in near month, buy Straddle in far month at same strike. Market expectation: The near Straddle decays faster than the longer dated Straddle. The trade benefits from an increase in volatility. Profit & loss characteristics at expiry (of near straddle): The potential profit in this trade arises as a result of the differing rates of time decay between the two straddles. Maximum profit will be realised if the sold straddle expires worthless and after this expiry, increased volatility or a directional move increases the value of the purchased straddle. Maximum loss will occur if the sold straddle is exercised and reduced volatility subsequently occurs, driving the purchased straddle into loss. 41 32. Long Diagonal Straddle Calendar Spread This is a time value trade (involving the sale and purchase of straddles with different expiry months), but with different strikes and as such cannot be adequately plotted in terms of its risk/reward profile. LIFFE CONNECT™ Strategy code: P. The Trade: Sell Straddle in near month, buy Straddle in far month at different strike. Market expectation: Profit from time decay differential, benefit from an increase in volatility, and/or benefit from a directional movement in the underlying (as the position involves straddles of different strikes, it is suitable for a directional view). Profit & loss characteristics at expiry (of near straddle): The potential profit in this trade arises as a result of the differing rates of time decay between the two straddles. Maximum profit will be realised if the sold straddle expires worthless, and after this expiry, increased volatility drives the purchased straddle in-themoney. Alternatively, the purchased straddle can be sold for its time value before the expiry date. Maximum loss will occur if the sold call is exercised and the market subsequently moves unfavourably, driving the purchased position out-of-the-money such that it expires worthless or can be sold for its time value only. 42 33. Long Jelly Roll This is a time value trade (involving the sale and purchase of options with different expiry months) and as such cannot be adequately plotted in terms of its risk/reward profile. LIFFE CONNECT™ Strategy code: A. The trade: Buy put, sell call at same strike price in near expiry month, sell put, buy call at same strike in far expiry month (the strike price in the far expiry need not be equal to the strike price in the near expiry). This trade is only valid for FTSE 100 Index option contracts. Market expectation: Direction neutral/volatility neutral. This trade consists of a short synthetic underlying in the near month and a long synthetic underlying in the far month. The holder will benefit if the differential between the futures prices of the two expiries (or the cost of carry differential in the case of premium up front options) widens. Profit & loss characteristics at expiry (of near synthetic): The potential profit of this trade is restricted as it arises from a widening of the futures price differential of the expiry months in question. After the expiry of the near term options, the holder is left with a long synthetic underlying position. The holder will therefore benefit from a rising market after the first expiry, and will be adversely affected by a falling market after the first expiry. 43 34. Long Straddle Strip This is a time value trade (involving the purchase of options with different expiry months) and as such cannot be adequately plotted in terms of its risk reward profile. LIFFE CONNECT™ Strategy code: M. The trade: Buy between two and four straddles. Each straddle must be in a separate expiry month. This strategy is not available for individual equity options or commodity options. Market expectation: A long straddle strip gives the holder an increased exposure to an increase in volatility. Profit & loss characteristics at expiry (of near straddle): The potential profit from this trade arises from either a significant directional movement in the underlying, or an increase in the expected volatility of the underlying across the range of expiry months. Loss will occur if the value of the underlying remains stable and/or the expected future volatility of the underlying falls. 44 35. Long Box profit price of underlying loss LIFFE CONNECT™ Strategy code: X. The trade: Buy a call and sell a put, buy a put and sell a call and at a higher strike. All four options should have the same expiry date. Market expectation: Direction neutral/volatility neutral. This is a 'locked trade', and hence its value is wholly independent of the price of the underlying. Where the synthetic long underlying price at one strike is trading at a lower price than the synthetic short underlying at the higher strike, such that the differential may be exploited. Profit and loss characteristics at expiry: If the pricing differential can be exploited, a profit will occur, the extent of the mis-pricing translating into the level of profit realised. The Box is regularly used by traders to close out positions near expiry. Generally traded at par (zero) for options on futures, and at the net cost of carry for index and equity options. Can be problematic if all positions are not closed out at exactly the same time. Market sensitivities at 30 days to expiry: As this is a form of arbitrage and profit is therefore independent of changes in the underlying, the value of the position will be independent of the market, hence: underlying down at-the-money up delta 0 0 0 gamma 0 0 0 theta 0 0 0 vega 0 0 0 Delta: Neutral Gamma: Neutral Theta: Neutral Vega: Neutral; put/call parity ensures that implied volatility will be exactly the same for both a call and a put with the same strike and expiry. NB: A Box is simply a conversion at one exercise price and a reversal at a different exercise price. 45 36. Long Two by One Ratio Call Spread 1 month to expiry 3 months to expiry expiry profit A price of underlying loss B LIFFE CONNECT™ Strategy code: H. The trade: Sell a call (A), buy 2 calls at higher strike (B). Market expectation: Market bullish/volatility bullish. Holder expects the market to settle above B. The position is usually established by selling an at-the-money or close to at-the-money call (A), and buying two out-of-the-money calls (B), such that it can be established at a small net credit. Depending on the strikes chosen, the position could also be established at break-even or at a small premium cost. Profit & loss characteristics at expiry: Profit: Unlimited if underlying rallies. At A or below, profit limited to net credit. Loss: Greatest loss occurs at higher strike B, and is the difference between strikes B-A, minus (plus) net credit (debit). Break-even: Lower break-even point is reached when the underlying exceeds the lower strike option A by the same amount as the net credit received (if initial position established at a net cost, there is no lower break-even point). Higher break-even point reached when intrinsic value of option A, is equal to the combined intrinsic value of the two higher strike options B, plus (minus) the net credit (debit). Market sensitivities at 30 days to expiry: Delta: Increases towards +1 as underlying rises. If, approaching expiry, the underlying is around strike A, the delta may become negative. Gamma: Highest at B and declines as the underlying rises above B. If, approaching expiry, the underlying is around strike A, the gamma may become negative. Theta: Value of position will decrease as the bought options are affected by time decay. However, if the underlying remains below, or around strike A, the theta may become positive. Vega: Value of position will increase as implied volatility increases. However, If approaching expiry, the underlying is around strike A, the vega may become negative. 46 37. Short Two by One Ratio Call Spread 1 month to expiry 3 months to expiry expiry B profit price of underlying A loss LIFFE CONNECT™ Strategy code: H. The trade: Buy a call (A), sell 2 calls at higher strike (B). Market expectation: Market neutral/volatility bearish. Holder expects that the market will not rally but will settle around point B. Position usually established by buying an at or close to-the-money call, and selling two out-of-the-money calls such that although it is a net short position, it may be established at a small cost (as in the above example). Depending on the strikes chosen, the position could also be established at break-even or at a small credit. Profit & loss characteristics at expiry: Profit: Greatest profit occurs at higher strike B which is the difference between strikes B-A plus (minus) net credit (debit). Loss: Unlimited if underlying rallies. At A or below, loss limited to net cost. Break-even: Lower break-even reached when the underlying exceeds the lower strike option A, by the same amount as the net cost of the position (if initial position established at a net credit, there is no lower break-even point). Higher break-even point reached when intrinsic value of option A, plus (minus) the net credit (debit) from establishing the position, is equal to the combined intrinsic value of the two higher strike options B. Market sensitivities at 30 days to expiry: Delta: Approaches -1 as the underlying rises. If, approaching expiry, the underlying is around strike A, the delta may become positive. Gamma: Highest at point B and declines as the underlying rises above B. If, approaching expiry, underlying is around strike A, it may become positive. Theta: Value of position will increase as the short options are affected by time decay. If the underlying remains below, or around strike A, the theta may become positive. Vega: Value of position will decrease as implied volatility increases. If, approaching expiry, the underlying is around strike A and the vega may become positive. 47 38. Long Two by One Ratio Put Spread 1 month to expiry 3 months to expiry expiry profit B price of underlying loss A LIFFE CONNECT™ Strategy code: H. The trade: Sell a put (B), buy two puts at lower strike (A). Market expectation: Market bearish/volatility bullish. Holder expects market to fall below A. Position usually established by selling an at or close to the money put (B), and buying two out-of-the-money puts (A), such that although it is a net long position, it can be established at a small credit as in the above example. Depending on the strikes chosen, the position could also be established at break-even or at a small premium cost. Lucro & amp; loss characteristics at expiry: Profit: Unlimited in a falling market. At B or above, profit limited to net credit. Loss: Greatest loss which occurs at lower strike A, is the difference between strikes B-A minus (plus) net credit (debit) Break-even: Lower break-even reached when the combined intrinsic value of the two purchased puts at A, plus (minus) the initial credit (debit) from establishing the position, are equal to the value of the written put B. Higher break-even point reached when intrinsic value of option B is equal to initial credit. If initial position established at a net cost, there is no higher break-even point. Market sensitivities at 30 days to expiry: Delta: Approaches -1 as underlying falls. If approaching expiry, the underlying is around strike A and the delta may become positive. Gamma: Highest at A and declines as the underlying falls below this point. If approaching expiry, the underlying is at B, the gamma may become negative. Theta: Value of position will decrease as the long options are affected by time decay. If the underlying remains above, or around strike B, the theta may become positive. Vega: Value of position will increase as implied volatility increases. If, approaching expiry, the underlying is around strike B and the vega may become negative. 48 39. Short Two by One Ratio Put Spread 1 month to expiry 3 months to expiry expiry A profit price of underlying B loss LIFFE CONNECT™ Strategy code: H. The trade: Buy a put (B), sell two puts at lower strike (A). Market expectation: Market neutral/volatility bearish. Holder expects market to settle around strike A, and feels that the market will not fall below A. Usually established by buying an at - the-money or close-to at-the-money put (B) and selling two out-of-the-money puts (A) such that it is established at a small cost. Depending on the strikes chosen, the position could also be established at break-even or at a small premium credit. Profit & loss characteristics at expiry: Profit: Greatest at A, it is the difference between strikes A-B plus (minus) net credit (debit). Loss: Unlimited in a falling market. At B or above, loss limited to net cost. Break-even: Lower break-even point is reached when the combined intrinsic value of the options at A equals the intrinsic value of option B, plus (minus) the net credit (debit) from establishing the position. Higher break-even point reached when intrinsic value of option B, is equal to the debit from establishing the position. Market sensitivities at 30 days to expiry: Delta: Increases towards +1 as market falls. If however, approaching expiry, the underlying is around strike A and the delta may become negative. Gamma: Highest at point A and declines as underlying falls below A. If approaching expiry, the underlying is at B and the gamma may become positive. Theta: Value of position will increase as short options are affected by time decay. If however, the underlying remains above or around strike B, the theta may become negative. Vega: Value of position will decrease as implied volatility increases. If, however, approaching expiry, the underlying is at B and the vega may become positive. 49 40. Long Call Ladder 1 month to expiry 3 months to expiry expiry B profit C A price of underlying loss LIFFE CONNECT™ Strategy code: L. The trade: Buy a call (A), sell call at higher strike (B), sell call at an even higher strike (C). Market expectation: Direction bearish/volatility bearish. In this case the holder expects the market to settle between B and C but feels that volatility will not rise. Profit & loss characteristics at expiry: Profit: Limited to the difference between strikes A and B plus (minus) net credit (debit). Greatest profit occurs between strikes B and C. Loss: Unlimited if underlying rallies. At A or below, loss limited to net cost. Break-even: Lower break-even reached when the underlying exceeds the lower strike option A, by the same amount as the net cost of the position. Higher break-even point reached when the intrinsic value of option A, plus (minus) the net credit (debit) from establishing the position, is equal to the intrinsic value of the two higher strike options at B and C. Market sensitivities at 30 days to expiry: Delta: Approaches -1 as underlying rises. If, approaching expiry, the underlying is around strike A, the delta becomes positive. Gamma: Usually negative. Highest between B and C. If, approaching expiry, the underlying is around strike A and the gamma becomes positive. Theta: Value of position will increase as the short options are affected by time decay. If the underlying remains below or around strike A, theta becomes slightly negative. Vega: Value of position will decrease as implied volatility increases. If, approaching expiry, the underlying is around strike A and the vega may become positive. 50 41. Short Call Ladder 1 month to expiry 3 months to expiry expiry profit C price of underlying loss A B LIFFE CONNECT™ Strategy code: L. The trade: Sell a call (A), buy call at higher strike (B), buy call at an even higher strike (C). Market expectation: Direction bullish/volatility bullish. Holder expects a substantial rise in the underlying market. Profit & loss characteristics at expiry: Profit: Unlimited if underlying rallies. At A or below, profit limited to net credit. Loss: Limited to the difference between strikes A and B minus (plus) net credit (cost). Break-even: Lower break-even reached when the underlying exceeds the lower strike option A by the same amount as the net credit received, (if initial position established at a net cost, there is no lower break-even point). Higher break-even point reached when intrinsic value of option A, is equal to the intrinsic value of the two higher strike options at B and C, plus (minus) the net credit (debit) in establishing the position. Market sensitivities at 30 days to expiry: Delta: Increases towards +1 as underlying rises. If, approaching expiry, the underlying is around strike A, the delta becomes negative. Gamma: Highest between strikes B and C. If, approaching expiry, the underlying is around strike A, the gamma becomes negative. Theta: Value of position will decrease as the long options decay. If the underlying remains below, or around strike A, theta becomes slightly positive. Vega: Value of position will increase as implied volatility increases. If, approaching expiry, the underlying is around strike A, the vega may become slightly negative. 51 42. Long Put Ladder 1 month to expiry 3 months to expiry expiry profit A B price of underlying C loss LIFFE CONNECT™ Strategy code: L. The trade: Sell put (A), sell put at higher strike (B), buy put at an even higher strike (C). Market expectation: Direction bullish/volatility bearish. Holder expects underlying to (continue to) be between strikes A and B and firmly believes that the market will not fall. Profit & loss characteristics at expiry: Profit: Limited to the difference B-C, plus (minus) net credit (debit). Maximised between strikes A and B. Loss: Unlimited if underlying falls. At C or above, loss limited to net cost of position. Break-even: Lower break-even reached when the intrinsic value of the purchased put C plus (minus) net credit (cost) is equal to the intrinsic value of the sold options A and B. Higher break-even reached when underlying falls below strike C by the same as the net cost of the position. Market sensitivities at 30 days to expiry: Delta: Positive. However, becomes negative if the underlying is around strike C approaching expiry. Gamma: Highest between A and B. If however, approaching expiry, the underlying is at C, the gamma becomes positive. Theta: Positive; value of position will increase as short options decay. If however, approaching expiry, the underlying is above or around C, theta may become slightly negative. Vega: Negative; value of position will decrease as implied volatility increases. If however, approaching expiry, the underlying is at C, the vega may become slightly positive. 52 43. Short Put Ladder 1 month to expiry 3 months to expiry expiry profit C price of underlying loss A B LIFFE CONNECT™ Strategy code: L. The trade: Buy put (A), buy put at higher strike (B), sell put at equally higher strike (C). Market expectation: Direction bearish/volatility bullish. Buyer expects a volatile market and additional profits can be made in a bearish market. Profit & loss characteristics at expiry: Profit: Unlimited if underlying falls. At C or above, profit limited to the net credit. Loss: Limited to the difference between B and C minus (plus) net credit (debit). Break-even: Higher break-even reached when the market falls below C by the value of the net credit. Lower break-even reached when the intrinsic value of options A and B plus (minus) the net credit (debit) is equal to the intrinsic value of C. Market sensitivities at 30 days to expiry: Delta: Approaches -1 as underlying falls. If however, approaching expiry, the underlying is around strike B or C, the delta may become positive. Gamma: Maximum between points A and B. However if approaching expiry, the underlying is at C, the gamma may become negative. Theta: Value of position will decrease as long options are affected by time decay. If however, the underlying is above, or about C, the theta may become positive. Vega: Value of position will increase as implied volatility increases. If however, approaching expiry, the underlying is around C, the vega may become negative. 53 44. Synthetic Long Underlying expiry profit price of underlying loss LIFFE CONNECT™ Strategy code: r. The Trade: Buy call, sell put at same strike (generally the at-the-money strike). This strategy is effectively a Reversal without the sale of the underlying. Market Expectation: Market bullish/volatility neutral. Profit and loss characteristics at expiry: Profit: Unlimited in a rising market. Loss: Unlimited in a falling market. Break-even: If the position is opened at a net debit, break-even is reached when the underlying rises above the strike price of the strategy by the net amount of premium paid. If the position is created at a net credit, break-even occurs when the underlying falls below the strike price by the net premium received. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta +++ +++ +++ Gamma 0 0 0 Theta 0 0 0 Vega 0 0 0 Delta: + 1 since the strategy synthetically replicates a long underlying. Gamma: Zero. Delta of position is not subject to change. Theta: Zero. Positive theta of short put nets out against negative theta of long call. Vega: Zero. Positive vega of long call nets out against negative vega of short put. 54 45. Synthetic Short Underlying expiry profit price of underlying loss LIFFE CONNECT™ Strategy code: r. The Trade: Buy put, sell call at the same strike (generally the at-the-money strike). This strategy is effectively a Conversion without the purchase of the underlying. Market Expectation: Market bearish/volatility neutral. Profit and loss characteristics at expiry: Profit: Unlimited in a falling market Loss: Unlimited in a rising market Break-even: If the position is opened at a net debit, break-even is reached when the underlying falls below the strike price of the strategy by the net amount of premium paid. If the position is created at a net credit, break-even occurs when the underlying rises above the strike price by the net premium received. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta --- --- --- Gamma 0 0 0 Theta 0 0 0 Vega 0 0 0 Delta: – 1 since the strategy synthetically replicates a short underlying. Gamma: Zero. Delta of position is not subject to change. Theta: Zero. Positive theta of short call nets out against negative theta of long put. Vega: Zero. Positive vega of long put nets out against negative vega of short call. 55 46. Long Call Spread versus Put 1 month to expiry 3 months to expiry expiry C profit price of underlying A B loss LIFFE CONNECT™ Strategy code: x. The Trade: Buy call (B), sell call at higher strike (C), sell put at any strike – the short put will generally be at a strike lower than both calls (A). This spread has a similar profile to the long call spread, but the short put reduces the cost of the strategy due to the intake of premium. Market Expectation: Market bullish/volatility bearish. Profit and loss characteristics at expiry: Profit: Limited in a rising market. Loss: Unlimited in falling market. Break-even: If the position is opened at a net debit, break-even occurs when the underlying rises above strike B by the net amount of premium paid. If the position is created at a net credit, break-even is reached when the underlying falls below strike A by the same amount as the premium received. Market sensitivities at 30 days to expiry: Underlying down at-the-money Delta + + + Gamma - -- - Theta + ++ + Vega - -- - + + up + Delta: Positive. Moves towards + 1 as future nears strike A. Become less positive as underlying rises. Gamma: Negative. Highest when underlying is around strike B. Positive at B near expiry. Theta: Positive at A and C. Negative at B near expiry. Vega: Negative at A and C. Positive at B near expiry. 56 47. Short Call Spread versus Put 1 month to expiry 3 months to expiry expiry profit B A price of underlying loss C LIFFE CONNECT™ Strategy code: x. The Trade: Sell call (B), buy call at higher strike (C), buy put at any strike – the long put will generally be at a strike lower than both calls (A). This spread has a similar profile to the short call spread, but the long put provides unlimited profit potential in a falling market. Market Expectation: Market bearish/volatility bullish. Profit and loss characteristics at expiry: Profit: Unlimited in a falling market Loss: Limited in a rising market Break-even: If the position is created at a net debit, break-even is reached when the underlying falls below strike A by the net amount of premium paid. If the position is opened at a net credit, break-even occurs when the underlying rises above strike B by the net premium received. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta --- -- - Gamma + ++ + Theta - -- - Vega + ++ + Delta: Negative. Moves towards – 1 as future nears strike A. Become less negative as underlying rises. Gamma: Positive. Highest when underlying is around strike B. Negative at B near expiry. Theta: Negative at A and C. Positive at B near expiry. Vega: Positive at A and C. Negative at B near expiry. 57 48. Long Put Spread versus Call 1 month to expiry 3 months to expiry expiry profit A price of underlying C B loss LIFFE CONNECT™ Strategy code: y. The Trade: Buy put (B), sell put at lower strike (A), sell call at any strike – the short call will generally be at a higher strike than both puts (C). The profile is similar to that of a long put spread, but with greater intake of premium due to the short call. Market Expectation: Market bearish/volatility bearish. Profit and loss characteristics at expiry: Profit: Limited in a falling market. Loss: Unlimited in a rising market. Break-even: If the position is created at a net debit, break-even is reached when the underlying falls below strike B by the net amount of premium paid. If the position is opened at a net credit, break-even occurs when the underlying rises above strike C by the premium received. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta - -- --- Gamma - -- - Theta + ++ + Vega - -- - Delta: Negative. Moves towards – 1 as underlying rises towards strike C. Gamma: Negative. Highest when underlying is around strike B. Positive at B near expiry. Theta: Positive at A and C. Negative at B near expiry. Vega: Negative at A and C. Positive at B near expiry. 58 49. Short Put Spread versus Call 1 month to expiry 3 months to expiry expiry profit B C loss price of underlying A LIFFE CONNECT™ Strategy code: y. The Trade: Sell put (B), buy put at lower strike (A), buy call at any strike – the long call will generally be at a higher strike than both puts (C). The profile is similar to that of a short put spread, but the long call provides unlimited profit potential should the underlying rise above C. Market Expectation: Market bullish/volatility bullish. Profit and loss characteristics at expiry: Profit: Unlimited in a rising market. Loss: Limited in a falling market. Break-even: If the position is opened at a net credit, break-even occurs when the underlying falls below strike B by the premium received. If the position is opened at a net debit, breakeven is reached when the underlying rises above strike C by the amount of premium paid. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta + ++ +++ Gamma + ++ + Theta - -- - Vega + ++ + Delta: Positive. Moves towards + 1 as underlying rises towards strike C. Gamma: Positive. Highest when underlying is around strike B. Negative at B near expiry. Theta: Negative at A and C. Positive at B near expiry. Vega: Positive at A and C. Negative at B near expiry. 59 50. Long Straddle versus Call 1 month to expiry 3 months to expiry expiry profit B price of underlying loss A LIFFE CONNECT™ Strategy code: z. The Trade: Buy call (A), buy put at same strike, sell call at any strike (B) – the short call will generally be at a strike higher than the straddle. This spread provides similar exposure to the long straddle, but with cheaper initial outlay due to the premium received from the short call. Market Expectation: Market neutral to bearish/volatility bullish. Profit and loss characteristics at expiry: Profit: Unlimited in falling market. Limited in rising market. Loss: Limited in a static market. Break-even: Reached when underlying moves in either direction from A by the net amount of premium paid. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta --- - + Gamma + ++ +/- Theta - -- -/+ Vega + ++ +/- Delta: Negative. Moves towards – 1 as underlying falls below strike of straddle. Gamma: Positive. Change in delta will have greatest effect around strike A. Theta: Time decay will have a negative effect on the value of the position. As the underlying rises, this effect becomes negligible. Vega: Positive. An increase in expected volatility will have a positive effect on the spread. This effect lessens as the underlying moves away from the strike of the straddle, particularly as it rises. 60 51. Short Straddle versus Call profit 1 month to expiry 3 months to expiry expiry A price of underlying B loss LIFFE CONNECT™ Strategy code: z. The Trade: Sell call (A), sell put at same strike (A), buy call at any strike (B)– the long call will generally be at a higher strike than the straddle. The profile is similar to that of a short straddle, but loss in a rising market is limited by the long call. Market Expectation: Market neutral/volatility bearish. Profit and loss characteristics at expiry: Profit: Limited in a static market. Loss: Limited in a rising market. Unlimited in a falling market. Break-even: Reached when underlying moves in either direction from A by the amount of premium received. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta +++ + - Gamma - -- +/- Theta + ++ +/- Vega - -- -/+ Delta: Positive. Moves towards + 1 as underlying falls below strike of straddle. Gamma: Negative. Change in delta will have greatest effect around strike A. Theta: Time decay will have a positive effect on the value of the position. As the underlying rises, this effect becomes negligible. Vega: Negative. A decrease in expected volatility will have a positive effect on the spread. This effect lessens as the underlying moves away from the strike of the straddle, particularly as it rises. 61 52. Long Straddle versus Put 1 month to expiry 3 months to expiry expiry profit A price of underlying loss B LIFFE CONNECT™ Strategy code: z. The Trade: Buy call (B), buy put at same strike (B), sell put at any strike (A)– generally the short put will be at a strike lower than the straddle. This spread offers similar exposure to the long straddle, but at a cheaper cost because of the premium taken in from the short put. Market Expectation: Market neutral to bullish/volatility bullish. Profit and loss characteristics at expiry: Profit: Unlimited in a rising market. Limited in a falling market. Loss: Limited in a static market. Break-even: Reached when the underlying moves in either direction from B by the amount of premium paid. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta - + +++ Gamma +/- ++ + Theta -/+ -- - Vega +/- ++ + Delta: Positive. Moves towards +1 as the underlying rises above the strike of the straddle. Gamma: Positive. Change in delta will have the greatest effect around strike B. Theta: Negative. Time decay will decrease the value of the spread, but as the underlying moves away from the strike of the straddle the effect of time decay lessens. In particular, as the underlying falls, the effect of time decay becomes negligible. Vega: Positive. Vega will be highest when the underlying is trading close to the strike of the straddle. 62 53. Short Straddle versus Put 1 month to expiry 3 months to expiry expiry B profit price of underlying A loss LIFFE CONNECT™ Strategy code: z. The Trade: Sell call (B), sell put at same strike, buy put at any strike (A) – generally the long put will be at a strike lower than the straddle (A). This spread offers similar exposure to the short straddle, but the long put limits risk in a falling market. Market Expectation: Market neutral/volatility bearish. Profit and loss characteristics at expiry: Profit: Limited in a static market. Loss: Limited in a falling market. Unlimited in a rising market. Break-even: Reached when the underlying moves in either direction from B by the amount of premium received. Market sensitivities at 30 days to expiry: Underlying down at-the-money up Delta + - --- Gamma +/- -- - Theta +/- ++ + Vega -/+ -- - Delta: Negative. Moves towards –1 as underlying rises above the strike of the straddle. Gamma: Negative. Change in delta will have the greatest effect around strike B. Theta: Positive. Time decay will increase the value of the spread, but as the underlying moves away from the strike of the straddle, the effect of time decay lessens. In particular, as the underlying falls, the effect of time decay becomes negligible. Vega: Negative. Vega will be highest when the underlying is trading close to the strike of the straddle. 63 54. Long Volatility Trade profit Volatility increase Volatility decrease Underlying price loss LIFFE CONNECT™ Strategy code: V. The trade: Buy puts and buy underlying or buy calls and sell underlying to give zero net delta. The position is dynamic in that as the underlying moves and the delta changes, additional futures must be bought or sold to maintain delta neutrality. For stock contingent trades, the “underlying” leg will comprise the underlying shares rather than the futures contract. Market expectation: Market neutral/volatility bullish. This position is a pure trade on volatility such that an increase in implied volatility will benefit the holder. Profit & loss characteristics at expiry: Profit: Dependent on an increase in implied volatility as well as any profits from the future hedge and hedge rebalancing. Loss: Limited to the costs of establishing the position plus any loss in rebalancing the hedge. Break-even: (i) For a long put, long futures position, if the price of the underlying increases, break-even is obtained where the gain in the value of the futures position (less the initial premium and less the rebalancing cost) is equal to zero. If price falls, break-even is obtained where the loss on the futures position (less the intrinsic value of the put, plus/minus the rebalancing cost) is equal to zero. (ii) For a long call, short futures position, if the underlying price increases, break-even is obtained where the gain in the call (less the loss in the future, plus/minus the rebalancing cost) is equal to zero. If price falls, break-even is obtained where the gain on the futures (minus the loss on the call, plus/minus the re-balancing cost) is equal to zero. Delta: Neutral. Gamma: Positive, the delta neutral position is highly sensitive to movement in the underlying, consequently the position requires dynamic hedging. Theta: Value of position will decrease as options decay. Vega: Value of position will increase as expected volatility increases. 64 55. Short Volatility Trade profit Volatility decrease Volatility increase Underlying price loss LIFFE CONNECT™ Strategy code: V. The trade: Sell puts and sell underlying or sell calls and buy underlying to give zero net delta. The position is dynamic in that as the underlying moves and the delta changes, additional futures must be bought or sold to maintain delta neutrality. For stock contingent trades, the “underlying” leg will comprise the underlying shares rather than the futures contract. Market expectation: Market neutral/volatility bearish. The position is a trade on volatility such that a decrease in implied volatility will benefit the holder. Profit & loss characteristics at expiry: Profit: Limited to the credit received from the sold options and any profit on rebalancing the hedge. Loss: The more implied volatility rises, the greater will be the potential losses. Break-even:. (i) For a short put, short futures position, if the underlying price increases, break-even is obtained where the initial premium on the put, minus the loss on the futures, plus/minus the rebalancing cost, is equal to zero. If price falls, the gain on the futures position, minus the loss on the put, plus/minus the rebalancing cost is equal to zero. (ii) For a short call, long futures position, if the underlying price rises, break-even is obtained where the gain on the futures, minus the loss on the call, plus/minus the rebalancing cost, is equal to zero. If price falls, break-even is obtained where the call premium, minus the loss on the futures, plus/minus the rebalancing cost, is equal to zero. Delta: Neutral. Gamma: Negative, the delta neutral position is highly sensitive to movements in the underlying, consequently the position requires dynamic hedging. Theta: Value of position will increase as the options decay. Vega: Value of position will decrease as expected volatility increases. 65 56. Conversion/Reversal profit price of underlying loss LIFFE CONNECT™ Strategy code: R. The trade: Conversion: Sell call, buy put at same strike, buy underlying. Reversal: Buy call, sell put at same strike, sell underlying. Market expectation: Direction neutral/volatility neutral. A Conversion or Reversal is a 'locked trade' and hence its value is wholly independent of the price of the underlying. The options position in a Conversion will create a synthetic short underlying and potential profit/loss will result from any pricing differential between this and the long underlying position. The options position within a Reversal will create a synthetic long underlying and so profit/loss realised will be fixed to the difference between the price of the short underlying and the long synthetic underlying. Profit and loss characteristics at expiry: If the pricing differential can be exploited, a profit will occur. The extent of the mis-pricing between the underlying and synthetic underlying positions will translate into the level of profit realised. Market sensitivities at 30 days to expiry: underlying down at-the-money up delta 0 0 0 gamma 0 0 0 theta 0 0 0 vega 0 0 0 As this is a form of arbitrage and profit is therefore independent of changes in the underlying, the positions value will be independent of the market, hence: Delta: Neutral Gamma: Neutral Theta: Neutral Vega: Neutral; put/call parity ensures that implied volatility must be the same for both a call and a put with the same strike and expiry. 66 Delta Neutral Strategies The remaining delta neutral strategy trades made available by LIFFE, as listed on page 6 are not described in detail here. As with the Volatility Trade on pages 64 and 65, and the Conversion/Reversal on page 66, these strategies consist of an options strategy superimposed with a position in the underlying instrument. This has the effect of creating a position which is delta neutral under the prevailing market conditions. In order to maintain delta neutrality, the underlying position may need to be adjusted should the underlying, the volatility or the time to expiry change. Positions in the underlying asset have no gamma, theta or vega. Therefore, whilst the delta of the options strategy will be affected by the addition of the underlying position, the remaining greeks will be unaffected. 67 68 LIFFE Options a guide to trading strategies LIFFE Administration and Management (a wholly owned subsidiary of LIFFE (Holdings) plc) Cannon Bridge House . 1 Cousin Lane . London EC4R 3XX . United Kingdom Telephone: +44 (0) 20 7623 0444 Fax: +44 (0) 20 7588 3624 liffe/ Registered in England no 1591809 2948/0202/2000/US .
TERM Spring '15 PROFESSOR Nouet TAGS Derivatives, Options, LIFFE CONNECT™ Strategy.
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Liffe option strategy guide.
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Liffe Strategies; List of Liffe Strategies; Liffe Volatility Strategies;. The strategies in this guide apply to options on LIFFE’s short term.
Unless otherwise stated, the strategies in this guide apply to all LIFFE’s options contracts. Quadro 3.