Other Call Buying Strategies Flashcards
Protected Short Sale
Purchasing a call at the same time one is short the underlying stock
Reverse Hedge
Purchasing calls on more shares than on has sold short
Simulated Combination
Selling stock short and buying two calls with differenct striking prices
Straddle Buy
Simultaneously buying a call and a put on the same underlying stock
Trading Against The Straddle
Selling calls or stock to take the profits from one side of a position
Another name for a protected short sale is a
Synthetic Put
The strategy called a synthetic straddle is the
Reverse Hedge
The effect of buying a call against a short sale of a stock is to BLANK
Limit the rise to a fixed amount
A synthetic straddle can be made more bullish or bearish by
altering the ratio of long calls to short stocks
To determine the maximum risk when you protect a short sale by buying a call option us the formula
RISK=striking price of purchased call+call price-stock price
As protection for a short sale, buy a call that is either BLANK the money or only slightly BLANK the money
at the money and out of the money
The synthetic straddle has Blank loss potential and BLANK profit potential
Limited & Unlimited
Before expiration, in a synthetic straddle, profits can sometimes be made close to the striking price because some BLANK is left in the purchased call
Time value premium
The max loss in a synthetic straddle position occurs when the stock price at expiration is
exactly at the striking price
The max risk of a protected short sale equals the striking price of the purchased call
Plus call price minus stock price
