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Fundamentals of Futures and Options Markets, 6 th Edition, Copyright © John C. Hull Positions in an Option & the Underlying (Figure 10.1, page 230) Profit STST K STST K STST K STST K (a) (b) (c)(d)
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Fundamentals of Futures and Options Markets, 6th Edition, Copyright © John C. Hull 2007 10.1
Trading Strategies Involving Options
Chapter 10
Fundamentals of Futures and Options Markets, 6th Edition, Copyright © John C. Hull 2007 10.2
Three Alternative Strategies
Take a position in the option and the underlying
Take a position in 2 or more options of the same type (A spread)
Combination: Take a position in a mixture of calls & puts (A combination)
Fundamentals of Futures and Options Markets, 6th Edition, Copyright © John C. Hull 2007 10.3
Positions in an Option & the Underlying (Figure 10.1, page 230)
Profit
STK
Profit
ST
K
Profit
ST
K
Profit
STK
(a) (b)
(c)
(d)
Fundamentals of Futures and Options Markets, 6th Edition, Copyright © John C. Hull 2007 10.4
Bull Spread Using Calls(Figure 10.2, page 231)
K1 K2
Profit
ST
Fundamentals of Futures and Options Markets, 6th Edition, Copyright © John C. Hull 2007 10.5
Bull Spread Using PutsFigure 10.3, page 233
K1 K2
Profit
ST
Fundamentals of Futures and Options Markets, 6th Edition, Copyright © John C. Hull 2007 10.6
Bear Spread Using PutsFigure 10.4, page 233
K1 K2
Profit
ST
Fundamentals of Futures and Options Markets, 6th Edition, Copyright © John C. Hull 2007 10.7
Bear Spread Using CallsFigure 10.5, page 234
K1 K2
Profit
ST
Fundamentals of Futures and Options Markets, 6th Edition, Copyright © John C. Hull 2007 10.8
Butterfly Spread Using CallsFigure 10.6, page 237
K1 K3
Profit
STK2
Fundamentals of Futures and Options Markets, 6th Edition, Copyright © John C. Hull 2007 10.9
Butterfly Spread Using PutsFigure 10.7, page 238
K1 K3
Profit
STK2
Fundamentals of Futures and Options Markets, 6th Edition, Copyright © John C. Hull 2007 10.10
Calendar Spread Using CallsFigure 10.8, page 238
Profit
STK
Fundamentals of Futures and Options Markets, 6th Edition, Copyright © John C. Hull 2007 10.11
Calendar Spread Using PutsFigure 10.9, page 239
Profit
STK
Fundamentals of Futures and Options Markets, 6th Edition, Copyright © John C. Hull 2007 10.12
A Straddle CombinationFigure 10.10, page 240
Profit
STK
Fundamentals of Futures and Options Markets, 6th Edition, Copyright © John C. Hull 2007 10.13
Strip & StrapFigure 10.11, page 241
Profit
K ST
Profit
K ST
Strip Strap
Fundamentals of Futures and Options Markets, 6th Edition, Copyright © John C. Hull 2007 10.14
A Strangle CombinationFigure 10.12, page 242
K1 K2
Profit
ST
Fundamentals of Futures and Options Markets, 6th Edition, Copyright © John C. Hull 2007 10.15
Suggested Practice Problems:
All Quiz Questions (10.1 – 10.7)10.1010.1210.1510.17
