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36 Cards in this Set
- Front
- Back
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Call bull spread |
Long call(K1) + short call(k2) |
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Put bull spread |
Long put(k1) + short put(k2) |
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Bull market |
A good market where you expect the stock price to rise |
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Call Bear Spread payoff |
Short call (k1) + long call (k2) |
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Put bear spread |
Short put(k1) + long put(k2) |
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Bear market |
A bad market where you expect the stock price to decrease |
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Box spread |
Bull spread + Bear spread |
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Why is a spread called a spread? |
Made up of either all calls or all puts |
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What is the best way to graph the payoff diagram of a ratio spread? |
Use the shortcut method |
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A collar resembles the payoff diagram of what other position? |
Short forward |
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Collar payoff |
Long put(k1) + short call(k2) |
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Collared stock payoff |
Long collar + long stock |
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What option strategy is when you long and short an unequal amount of either all calls or all puts at different strike prices? |
Ratio spread |
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The payoff of what option strategy is a constant? |
Box spread |
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What is the profit of a box spread? |
0 |
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What’s the payoff for a straddle? |
Long put(k) + long call(k) |
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Which option strategy is a bet on high volatility? |
Long straddle |
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What option strategy is a bet on low volatility? |
Written straddle |
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What is one unique way to form a butterfly spread? |
Written straddle(k1) + long put(k1) + long call(k2) |
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The payoff diagram for a floor resembles a “what kind of option” shifted upwards |
Call |
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The payoff diagram for a cap resembles “what kind of option” shifted downwards? |
A put |
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What is one thing you can do to protect yourself from a price decrease? |
Buy a put |
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What is one thing you can do to protect yourself against a price increase? |
Buy a call |
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A long call + lending at the risk free rate forms a what |
Floor |
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A long put+ borrowing money forms a what? |
A cap |
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What option strategy would you take if you wanted your payoff to be constant over a range of spot prices. And for spot prices outside this range, you want your payoff to increase as the spot price decreases |
Collar |
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How many zero cost collars are there for any given stock? |
An infinite amount |
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What option strategy is similar to a written straddle, except that you want insurance for large changes in price |
Butterfly spread |
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What option strategy should you take if you believe the stock price will go up or down? |
Straddle |
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What option strategy should you take if you believe the stock price will not change |
Written straddle |
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What strategy should you use if you want to have a similar strategy to straddles, but you want lower financing costs? |
Strangle |
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A collared stock is the same as what other option strategy? |
Bull spread |
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Payoff diagram for a butterfly spread using a written strangle |
Long put (k1) + short put(k2) + short call(k2) + long call(k3) |
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What strategy should you take if you want to receive a guaranteed payoff? |
Box spread |
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True or False: you can make a box spread from a combination of a long straddle and a short straddle |
True |
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How can you make a box spread using synthetic forwards? |
Synthetic long forward(k1) + synthetic short forward(k2) |
