OptionsD.Majumdar

Truth!!

• “I view derivatives as time bombs, both for the parties that deal in them and the economic system. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal. “

Links

• http://www.nse-india.com/• http://www.bseindia.com/

Long Call• Payoff at Maturity :- Max(S-K,0)

Short Call• Payoff at Maturity :- [-Max(S-K,0)]

Long Put• Payoff at Maturity :- Max(K-S,0)

Short Put• Payoff at Maturity :- Max(K-S,0)

Put-Call Parity• The ingredients:-• Long Call• Short Put• Payoff at Maturity :- C-P = S – K . Why?• Payoff at any time :- c – p = s - K

Trading Strategies using OptionsD.Majumdar

Bull Spread Payoff

Bull Spread

2 Call Options Opposite Directions

Different Strikes

Everything Else Constant

Bear Spread Payoff

Straddle Payoff

Straddle

Call Option + Put Option

Same Direction

Everything else constant

Strangle Payoff

Strangle

Call Option + Put Option

Same Direction

Different Strikes

Everything else

constant

Butterfly Spread Payoff

Butterfly Spread

1 Long Call at K3

2 Short Calls at K2

1 Long Call at Strike K1

Condor Spread Payoff

Condor

1 Long Call at Strike K1

• 1 Short Call at Strike K2

1 Short Call at Strike K3

• 1 Long Call at Strike K4

Buffered Levered Note