n option trader believes that, in the next month or so, trading conditions in an underlying are going to be very volatile. She thinks that there is a good chance that the underlying will rise significantly in value and a good, but somewhat smaller, chance that the underlying will fall significantly in value. She judges the chances of small movements in the underlying, either up or down, to be very small. Design an option p
n option trader believes that, in the next month or so, trading conditions in an underlying are going to be very volatile. She thinks that there is a good chance that the underlying will rise significantly in value and a good, but somewhat smaller, chance that the underlying will fall significantly in value. She judges the chances of small movements in the underlying, either up or down, to be very small. Design an option p
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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An option trader believes that, in the next month or so, trading conditions in
an underlying are going to be very volatile. She thinks that there is a good
chance that the underlying will rise significantly in value and a good, but
somewhat smaller, chance that the underlying will fall significantly in value.
She judges the chances of small movements in the underlying, either up or
down, to be very small. Design an option position that the trader could build
in order to profit from this view. [Write no more than half of a page of A4]
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