Chapter 20, Problem 15PS

a

Summary Introduction

To evaluate:The investment strategy A in which January call options on CSI shares are written with a strike price of $45. The calls are sold at $3.

Introduction:

Zero cost collar strategy: It is a type of options collar strategy which protects the losses incurred by the investor. The solution used is by purchasing a call and put options which finally cancel each other. Profits are capped if this strategy is used. It is defined as equity risk reversals, zero cost options.

b.

Summary Introduction

To evaluate:The investment strategy B in which January put options on CSI shares are purchased with a strike price of $35.

Introduction:

Zero cost collar strategy: It is a type of options collar strategy which protects the losses incurred by the investor. The solution used is by purchasing a call and put options which finally cancel each other. Profits are capped if this strategy is used. It is known as equity risk reversals, zero cost options.

c.

Summary Introduction

To evaluate:The investment strategy C in which zero-cost collar is established by writing the January call options and buying put options. Also highlights the advantages and disadvantages of above three and your recommended options.

Introduction:

Zero cost collar strategy: It is a type of options collar strategy which protects the losses incurred by the investor. The solution used is by purchasing a call and put options which finally cancel each other. Profits are capped if this strategy is used. It is known as equity risk reversals, zero cost options.