Option strategies

Question 1

Covered Call

Answer 1

Long stock, short call

BXM provides long equity exposure (positive delta) and short volatility exposure (negative vega)

Question 2

protective put

Answer 2

long stock, long put

Limits downside, unlimited upside but profits will always be lower than the stock

PPUT has lowest downside deviation -> Sortino ratios of various strategies very similar
PPUT provides long equity exposure (positive delta) and long volatility exposure (positive vega)

Question 3

Hoe veranderen de sharpe en sortino ratios van een PPUT tov een aandeel

Answer 3

lagere sharpe ratio maar hogere sortino ratio, omdat sortino ratio alleen kijkt naar downside risk

Question 4

Collar

Answer 4

long stock, long put, short call different strike prices,

brackets portfolio between two bounds and reduces costs of only the protective put at the expense of giving up profit potential

Question 5

Bull spread

Answer 5

Buying a call with X1 and selling a call with 2x > X1
Buying a put with with X1 and selling a put with X2 > X1
pays off if the underlying appreciates

Bull put spread advantage: initial cash inflow

Question 6

Bear spread

Answer 6

Buying a call with X2 and selling a call with X1 < X2
Buying a put with with X2 and selling a put with X1 < X2
pays off if the underlying depreciates

Long in the higher strike price
Call bear spread advantage: initial cash inflow

Question 7

Straddle

Answer 7

long call and put with same strike price

Question 8

Strangle

Answer 8

long call and put with different strike price