M
mtm
Member
Hi
I'm hoping someone can help me here - the three questions are more cid specific but I see some of the posts have been answered by students who have passed st6 and I suppose they could be st5 relevant.
(1) When dealing with options does a payoff diagram include the option premium or not? As I understand it a profit/loss diagram takes the option premiums into account but the payoff diagram just basically uses intrinsic value and ignores the option premiums?
(2) How would you describe the following strategy?
(a) name the strategy
(b) sketch the pay-off diagram
(c) state the trader’s most likely reason for executing the strategy
Buy one call option with a strike price of £950 at £60 and sell three call
options with a strike price of £1,050 at £16.60 each. All options have the
same expiry date.
(3) Explain whether delta would be positive or negative for a short put
trading position. A short put trading position means that the trader has
sold a put option.
Thanks!
I'm hoping someone can help me here - the three questions are more cid specific but I see some of the posts have been answered by students who have passed st6 and I suppose they could be st5 relevant.
(1) When dealing with options does a payoff diagram include the option premium or not? As I understand it a profit/loss diagram takes the option premiums into account but the payoff diagram just basically uses intrinsic value and ignores the option premiums?
(2) How would you describe the following strategy?
(a) name the strategy
(b) sketch the pay-off diagram
(c) state the trader’s most likely reason for executing the strategy
Buy one call option with a strike price of £950 at £60 and sell three call
options with a strike price of £1,050 at £16.60 each. All options have the
same expiry date.
(3) Explain whether delta would be positive or negative for a short put
trading position. A short put trading position means that the trader has
sold a put option.
Thanks!