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Option Trading Workbook (Deb Sahoo)

This document provides an overview of various option trading strategies categorized by their risk-reward profile and implied volatility outlook. It describes 18 strategies including their maximum potential profit and loss. For each strategy, it lists the components (options used), risk-reward metrics, and whether the strategy is bearish, bullish or neutral. This allows traders to evaluate different strategies based on their market outlook and risk tolerance.

Uploaded by

Deb Sahoo
Copyright
© Attribution Non-Commercial (BY-NC)
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0% found this document useful (0 votes)
380 views25 pages

Option Trading Workbook (Deb Sahoo)

This document provides an overview of various option trading strategies categorized by their risk-reward profile and implied volatility outlook. It describes 18 strategies including their maximum potential profit and loss. For each strategy, it lists the components (options used), risk-reward metrics, and whether the strategy is bearish, bullish or neutral. This allows traders to evaluate different strategies based on their market outlook and risk tolerance.

Uploaded by

Deb Sahoo
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Option Trading Strategy

| Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT |

Option Trading Workbook (Deb Sahoo)

Option Strategy Landscape


| Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT |

LOW
1. Short Call
Sell/Write one call option

IMPLIED VOLATILITY
NEUTRAL
Sell the Underlying

Risk / Reward:
Maximum Loss: Unlimited as the market rises.
Maximum Gain: Limited to the premium received for selling the option.

Risk / Reward:
Maximum Loss: Limited to the net premium paid for the option.
Maximum Gain: Unlimited as the market sells off.

2. Call Bear Spread


Sell one call option with a low strike price
Buy one call option with a higher strike price
Bearish

2. Short Synthetic
Short one call option at P
Long one put option at P

Risk / Reward:
Maximum Loss: Limited to the difference between the two strikes minus the net premium
Maximum Gain: Limited to the net premium received for the position. I.e. the premium received for the short call minus the premium
paid for the long call

Risk / Reward
Maximum Loss:Unlimited.
Maximum Gain: Unlimited.

3. Put Bear Spread


Short one put option at a lower strike price
Long one put option at a higher strike price

3. Put Backspread
Long two OTM put
Short one ITM put

Risk / Reward:
Maximum Loss: Limited to the net amount paid for the spread. I.e. the premium paid for the long position less the premium received
for the short position
Maximum Gain: Limited to the difference between the two strike prices minus the net paid for the position
1. Short Straddle
Short one call option at P
Short one put option at P
Risk / Reward:
Maximum Loss: Unlimited as the market moves in either direction
Maximum Gain: Limited to the net premium received for selling the options
2. Short Strangle
Short one put at lower strike price
Short one call at a higher strike price
Risk / Reward:
Maximum Loss: Unlimited as the market moves in either direction
Maximum Gain: Limited to the net premium received for selling the options
3. Short Gut
Sell one call option at a higher strike price
Sell one put option at a higher strike price
Risk / Reward:
Maximum Loss: Unlimited as the market moves in either direction
Maximum Gain: Limited to the net premium received for selling the options
4. Call Time Spread
Short one future month call
Long one far month call (i.e. the option you sell is to be closer to expiration than the option you are buying)
Risk / Reward:
Maximum Loss: Limited on both down and upside for market direction
Maximum Gain: Limited
5. Call Ratio Vertical Spread
Long one ITM call
Short two OTM call
Risk / Reward:
Maximum Loss: Unlimited on the upside and limited on the downside
Maximum Gain: Limited to the difference between the two strikes less the net premium paid
Neutral

Option Trading Workbook (Deb Sahoo)

HIGH
1. Long Put
Buy one put option.

Risk / Reward:
Maximum Loss: Limited to the difference between the two strikes less the premium received for the spread.
Maximum Gain: Limited on the upside to the net premium received for the spread. Unlimited on the downside.
Do Nothing

1. Long Straddle
Buy one call option at P
Buy one put option at P
Risk / Reward:
Maximum Loss: Limited to the total premium paid for the call and put options
Maximum Gain: Unlimited as the market moves in either direction
2. Long Strangle
Long one call option at a higher strike price
Long one put option at a lower strike price
Risk / Reward:
Maximum Loss: Limited to the total premium paid for the call and put options
Maximum Gain: Unlimited as the market moves in either direction
3. Long Gut
Buy one call at higher strike price
Buy one put at a higher strike price
Risk / Reward:
Maximum Loss: Limited to the total premium paid plus (call strike price minus put strike price)
Maximum Gain: Unlimited as the market moves in either direction
4. Put Time Spread
Short one front month put
Long one far month put (i.e. the option you sell is to be closer to expiry than the option you are buying).
Risk / Reward:
Maximum Loss: Limited
Maximum Gain: Limited

6. Put Ratio Vertical Spread


Short two OTM put
Long one ITM put
Risk / Reward:
Maximum Loss: Unlimited on the downside and limited to the net premium paid on the upside
Maximum Gain: The difference between the two strike prices less the premium paid for the position

M
A
R
K
E
T

7. Long Call Butterfly


Short two ATM call
Long one ITM call
Long one OTM call

D
I
R
E
C
T
I
O
N

5. Short Call Butterfly


Long two ATM call
Short one ITM call
Short one OTM call

Risk / Reward:
Maximum Loss: Limited to the ATM strike less the ITM strike less the net premium paid for the spread
Maximum Gain: Limited to the net premium received from the spread

Risk / Reward:
Maximum Loss: Limited to the net difference between the ATM strike less the ITM strike less the premium received for the position
Maximum Gain: Limited to the net premium received for the option spread

8. Long Put Butterfly


Sell two ATM put
Buy one ITM put
Buy one OTM put

6. Short Put Butterfly


Long two ATM put
Short one ITM put
Short one OTM put

Risk / Reward:
Maximum Loss: Limited to the ATM strike less the ITM strike less the net premium paid for the spread
Maximum Gain: Limited to the net premium received from the spread

Risk / Reward:
Maximum Loss: Limited to the net difference between the ATM strike less the ITM strike less the premium received for the position
Maximum Gain: Limited to the net premium received for the option spread

9. Long Iron Condor


Long ITM Option (Long 97 Call)
Short ITM Option (Short 99 Call)
Short OTM Option (Short 101 Call)
Long OTM Option (Long 103 Call)

7. Short Iron Condor


Short ITM Option (Short 97 Call)
Long ITM Option (Long 99 Call)
Long OTM Option (Long 101 Call)
Short OTM Option (Short 103 Call)

Risk / Reward:
Max loss: Limited. The maximum loss of a long condor occurs at the wings of the option spread. It is the minimum of the difference
between the lower strike call spread less the higher call spread less the total premium paid for the condor
Max gain: Limited. The maximum profit of a long condor will be realized when the stock is trading between the two middle strike
prices. When you look at the Condor as 2 call spreads, take the one that has the maximum distance between the strike prices, subtract
the net premium paid for the spread and that is the max loss
1. Naked Put
Sell one put option
Risk / Reward:
Maximum Loss: Unlimited in a falling market.
Maximum Gain: Limited to the premium received for selling the put option.
2. Call Bull Spread
Buy one call with a low strike price
Sell one call with a higher strike price
Risk / Reward:
Maximum Loss: Limited to premium paid for the long option minus the premium received for the short option
Maximum Gain: Limited to the difference between the two strike prices minus the net premium paid for the spread
3. Put Bull Spread
Buy one put option with a strike price
Sell one put option with a higher strike price than the put you bought
Risk / Reward:
Maximum Loss: Limited to the difference between the two strike prices minus the net premium received for the position.
Maximum Gain: Limited to the net credit received for the spread. I.e. the premium receieved for the short option less the premium
paid for the long option.

Bullish

4. Covered Call
Long underlying asset
Short call options.
Risk / Reward:
Maximum Loss: Unlimited on the downside.
Maximum Gain: Limited to the premium received from the sold call option.

Option Trading Workbook (Deb Sahoo)

Risk / Reward:
Max loss: Limited. The maximum loss of a short condor occurs at the center of the option spread. If youve broken the Condor down as 2
call (put) spreads, take the one that has the maximum distance between the strike prices, add the net premium received for the spread and
that is the max loss
Max gain: Limited. The maximum profit of a short condor occurs on the wings, when the underlying asset is trading past the upper or
lower strike prices
Buy the Underlying

1. Long Naked Call


Purchase of one call option
Risk / Reward:
Maximum Loss: Limited to the premium paid up front for the option
Maximum Gain: Unlimited as the market rallies
2. Long Synthetic
Buy one call option at P
Sell one put option at P
Risk / Reward:
Maximum Loss:Unlimited.
Maximum Gain: Unlimited.
3. Call Ratio Spread
Sell one ITM call option
Buy two OTM call options at P
Risk / Reward:
Maximum Loss: Limited to the difference between the two strikes plus the net premium (which should be a credit).
Maximum Gain: Unlimited on the upside and limited on the downside.
4. Call Backspread
Short one ITM call
Long two OTM call
Risk / Reward:
Maximum Loss: Limited to the difference between the two strikes plus the net premium (which should be a credit)
Maximum Gain: Unlimited on the upside and limited on the downside

5. Protective Put
Long the underlying asset
Long put option
Risk / Reward:
Maximum Loss: Limited to the premium paid for the put option.
Maximum Gain: Unlimited as the market rallies.
6. Collar
Long underlying stock
Short OTM call option
Long OTM put option
Risk / Reward:
Maximum Loss: Any loss taken on the stock +/- the premium for the options. The loss on the stock will be the purchase price of the
stock minus the strike price of the put option (as you will exercise at that price) plus the net premium paid or received.
Maximum Gain: The profit of the stock +/- the premium for the optoins. The profit on the stock will be the strike price of the call
option minus the purchase price of the stock (as you will be exercised and deliver at the strike) plus the net premium paid or
received.

Option Trading Workbook (Deb Sahoo)

Inputs for Creating an Option Strategy


| Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT |
This worksheet is a simple option pricer. You simply enter the option details into the blue cells and the output values will be displayed underneath in the grey cells.
Company Ticker
Outlook of the Stock
Name of Option Strategy Employing

NTAP
Bullish

NetApp Inc.
Bullish or Bearish ?

Input
Current Underlying Price
Exercise Price
Strategy Implementation Date
Expiry Date
Annual Historical Volatility
Annual Risk Free Rate
Dividened Yield

Value
$34.90
$40.00
5/3/2013
1/18/2014
40.00%
2.00%
0.00%

DTE (Years)

0.71

Parameter
Theoretical Price
Delta
Gamma
Theta
Vega
Rho

Option Trading Workbook (Deb Sahoo)

Call Option
$3.03
0.4235
0.0332
-0.0095
0.1153
0.0837

Comments
The current base price of the instrument, eg, the closing price of Xilinx stock
The price at which the underlying instrument will be exchanged. Also called Strike Price
The Date which the contract expires
The Historical Volatility of the asset's returns
The current risk free interest rate i.e. your return on cash held in the bank
The Annualized Dividend Growth Rate of the Stock

Put Option
$7.57
-0.5765
0.0332
-0.0074
0.1153
-0.1972

What It Means For Your Strategy ?s


Measures the exposure of option price to movement of underlying stock price
Measures the exposure of the option delta to the movement of the underlying stock price
Measures the exposure of the option price to the passage of time
Measures the exposure of the option price to changes in volatility of the underlying
Measures the exposure of the option price to changes in risk free interest rates (Rarely Used)

Black Sholes Valuation of Option


| Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT |
Input
Current Stock Price
Annual Standard Deviation
Annual Risk-Free Rate
Annual Dividend Yield
Exercise Price
Days to Expiration

Value
$34.90
40.00%
2.00%
0.00%
$40.00
260

d1
d2

-0.193
-0.531

N(d1)
N(d2)

0.4235
0.2978

Intrinsic Call Value


Black-Scholes Call Price
Put Price (Put/Call Parity)

$0.00
$3.03
$7.57

Put Option Delta

Option Trading Workbook (Deb Sahoo)

-0.5765

Theoretical Volatility vs. Market View of Voliatility of Available Options in the Market
| Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT |
This worksheet allows you to price a string of calls and puts for the same expiration and compare implied market volatility to the theoretical volatility of the underlying
Company Name
$34.90
5/3/2013
40%
1/18/2014
2.00%
0.00%
260
0.71

NetApp Inc.
Underlying Price
Strategy Implementation Date
Annual Historical Volatility
Expiry Date
Annual Risk Free Rate
Dividend Yield
DTE
DTE in Years

Implied Volatility From Available Call Options in the Market


Strike Prices
20.00
23.00
25.00
30.00
33.00
34.00
35.00
38.00
40.00
42.00
45.00
47.00
50.00
55.00
60.00
60.00
60.00
60.00
60.00
60.00

ITM
ITM
ITM
ITM
ITM
ITM
OTM
OTM
OTM
OTM
OTM
OTM
OTM
OTM
OTM
OTM
OTM
OTM
OTM
OTM

Theoretical
Price
$
15.35
$
12.67
$
11.02
$
7.49
$
5.80
$
5.31
$
4.85
$
3.67
$
3.03
$
2.50
$
1.85
$
1.51
$
1.11
$
0.65
$
0.38
$
0.38
$
0.38
$
0.38
$
0.38
$
0.38

Market
Price
$14.91
$9.95
$10.59
$7.30
$4.50
$4.00
$3.15
$2.22
$1.64
$1.12
$0.82
$0.57
$0.15
$0.36
$0.06
$0.06
$0.06
$0.06
$0.06
$0.06

Implied Volatility
0.00%
0.00%
31.25%
38.01%
28.06%
28.40%
25.28%
27.54%
27.61%
26.87%
28.89%
28.58%
23.96%
34.56%
28.92%
28.92%
28.92%
28.92%
28.92%
28.92%

Delta
0.97
0.93
0.88
0.75
0.65
0.61
0.58
0.48
0.42
0.37
0.29
0.25
0.20
0.13
0.08
0.08
0.08
0.08
0.08
0.08

Gamma
0.0060
0.0119
0.0165
0.0272
0.0315
0.0325
0.0332
0.0338
0.0332
0.0320
0.0292
0.0270
0.0235
0.0178
0.0128
0.0128
0.0128
0.0128
0.0128
0.0128

Option Greeks
Vega
0.0208
0.0413
0.0573
0.0946
0.1095
0.1127
0.1151
0.1174
0.1153
0.1110
0.1015
0.0938
0.0816
0.0616
0.0445
0.0445
0.0445
0.0445
0.0445
0.0445

Implied Volatility From Available Put Options in the Market


Theta
-0.0026
-0.0043
-0.0055
-0.0083
-0.0093
-0.0096
-0.0097
-0.0098
-0.0095
-0.0091
-0.0083
-0.0076
-0.0066
-0.0049
-0.0036
-0.0036
-0.0036
-0.0036
-0.0036
-0.0036

Rho
0.1315
0.1399
0.1414
0.1319
0.1195
0.1147
0.1097
0.0941
0.0837
0.0737
0.0599
0.0517
0.0410
0.0271
0.0176
0.0176
0.0176
0.0176
0.0176
0.0176

Strike Prices
20.00
23.00
25.00
30.00
33.00
34.00
35.00
38.00
40.00
42.00
45.00
47.00
50.00
55.00
60.00
60.00
60.00
60.00
60.00
60.00

OTM
OTM
OTM
OTM
OTM
OTM
ITM
ITM
ITM
ITM
ITM
ITM
ITM
ITM
ITM
ITM
ITM
ITM
ITM
ITM

Theoretical
Price
$
0.16
$
0.45
$
0.77
$
2.16
$
3.43
$
3.93
$
4.46
$
6.24
$
7.57
$
9.00
$
11.31
$
12.94
$
15.50
$
19.98
$
24.64
$
24.64
$
24.64
$
24.64
$
24.64
$
24.64

Market
Price
$0.48
$0.58
$0.72
$1.95
$2.80
$3.70
$3.80
$5.50
$6.80
$8.50
$10.60
$13.61
$17.91
$23.95
$28.80
$28.80
$28.80
$28.80
$28.80
$28.80

Implied Volatility
51.06%
43.00%
39.10%
37.74%
34.21%
37.98%
34.31%
33.72%
33.27%
35.42%
32.59%
46.76%
64.40%
82.00%
87.93%
87.93%
87.93%
87.93%
87.93%
87.93%

Delta
-0.03
-0.07
-0.12
-0.25
-0.35
-0.39
-0.42
-0.52
-0.58
-0.63
-0.71
-0.75
-0.80
-0.87
-0.92
-0.92
-0.92
-0.92
-0.92
-0.92

Gamma
0.0060
0.0119
0.0165
0.0272
0.0315
0.0325
0.0332
0.0338
0.0332
0.0320
0.0292
0.0270
0.0235
0.0178
0.0128
0.0128
0.0128
0.0128
0.0128
0.0128

Option Greeks
Vega
0.0208
0.0413
0.0573
0.0946
0.1095
0.1127
0.1151
0.1174
0.1153
0.1110
0.1015
0.0938
0.0816
0.0616
0.0445
0.0445
0.0445
0.0445
0.0445
0.0445

Theta
-0.0015
-0.0030
-0.0041
-0.0067
-0.0076
-0.0077
-0.0078
-0.0077
-0.0074
-0.0068
-0.0058
-0.0051
-0.0039
-0.0020
-0.0003
-0.0003
-0.0003
-0.0003
-0.0003
-0.0003

Rho
-0.0090
-0.0216
-0.0341
-0.0788
-0.1122
-0.1241
-0.1361
-0.1728
-0.1972
-0.2213
-0.2561
-0.2784
-0.3101
-0.3591
-0.4038
-0.4038
-0.4038
-0.4038
-0.4038
-0.4038

Implied Volatility

Implied Volatility
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
-10.00% 0.00

10.00

20.00

30.00

40.00

50.00

Strike Prices
Implied Volatility From Available Call Options in the Market

Option Trading Workbook (Deb Sahoo)

Implied Volatility From Available Put Options in the Market

60.00

70.00

Option Strategy Implementation


| Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT |
This worksheet lets you implement combinations of options positions and provides you the P&L plot of your strategy. The data for the options is taken from the Input tab. Enter the number of contracts for each position with positive for Long positions and
negative for short positions. Enter C for calls, P for puts, S for stock. If you know what the option premium in the market, you can enter in the "Actual Market Premium" section.
Company Name
Input
Current Underlying Price
Exercise Price
Strategy Implementation Date
Expiry Date
Annual Historical Volatility
Annual Risk Free Rate
Dividened Yield

NetApp Inc.
Value
$34.90
$40.00
5/3/2013
1/18/2014
40.00%
2.00%
0.00%

No of Contracts
Contract Type
Strike Price
Calculated Theoretical Premium
Actual Market Premium
Premium To Be Used
Delta
Gamma
Theta
Vega
Rho

Position 1
0
S
$34.90
$4.40
$0.00
$0.00
0.00
0.00
0.00
0.00
0.00

Comments
The current base price of the instrument, eg, the closing price of Xilinx stock
The price at which the underlying instrument will be exchanged. Also called Strike Price
The Date which the contract expires
The Historical Volatility of the asset's returns
The current risk free interest rate i.e. your return on cash held in the bank
The Annualized Dividend Growth Rate of the Stock
Position 2
-1
C
$25.00
$11.02
$10.59
$10.59
-0.88
-0.02
0.01
-0.06
-0.14

Position 3
1
C
$30.00
$7.49
$7.30
$7.30
0.75
0.03
-0.01
0.09
0.13

Graph Increment
5.00

Position 4
1
C
$40.00
$3.03
$1.64
$1.64
0.42
0.03
-0.01
0.12
0.08

Position 5
-1
C
$45.00
$1.85
$0.82
$0.82
-0.29
-0.03
0.01
-0.10
-0.06

Position 6

Position 7

Position 8

Position 9

Position 10

Enter S/C/P
$0.00

$0.00

$0.00

$0.00

$0.00

$0.00
0.00
0.00
0.00
0.00
0.00

$0.00
0.00
0.00
0.00
0.00
0.00

$0.00
0.00
0.00
0.00
0.00
0.00

$0.00
0.00
0.00
0.00
0.00
0.00

$0.00
0.00
0.00
0.00
0.00
0.00

Total Profit / Loss of Option Strategy at Expiration


3.00
2.00
1.00
Total P&L
0.00
2
-1.00
-2.00
-3.00

Option Trading Workbook (Deb Sahoo)

10

15

20

25

30

Strategy Total

35

40

45

50

55

60

Total Theoretical P&L


65
70

$2.47 Red - Debit, Black - Credit


-0.01
0.01
0.00
0.05
0.01

Underlying Price
2
5
10
15
20
25
30
35
40
45
50
55
60
65
70

Strat1
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat2
10.59
10.59
10.59
10.59
10.59
10.59
5.69
0.69
-4.31
-9.31
-14.31
-19.31
-24.31
-29.31
-34.31

P&L Payoff of Each Strategy Relative to Changes in Underlying Price


Strat3
Strat4
Strat5
Strat6
Strat7
-7.30
-1.64
0.82
0.00
0.00
-7.30
-1.64
0.82
0.00
0.00
-7.30
-1.64
0.82
0.00
0.00
-7.30
-1.64
0.82
0.00
0.00
-7.30
-1.64
0.82
0.00
0.00
-7.30
-1.64
0.82
0.00
0.00
-7.30
-1.64
0.82
0.00
0.00
-2.40
-1.64
0.82
0.00
0.00
2.60
-1.64
0.82
0.00
0.00
7.60
3.26
0.82
0.00
0.00
12.60
8.26
-4.08
0.00
0.00
17.60
13.26
-9.08
0.00
0.00
22.60
18.26
-14.08
0.00
0.00
27.60
23.26
-19.08
0.00
0.00
32.60
28.26
-24.08
0.00
0.00

Strat8
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat9
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat10
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Total P&L
2.47
2.47
2.47
2.47
2.47
2.47
-2.43
-2.53
-2.53
2.37
2.47
2.47
2.47
2.47
2.47

Underlying Price
2
5
10
15
20
25
30
35
40
45
50
55
60
65
70

Strat1
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat2
10.59
10.59
10.58
10.40
9.41
7.14
3.73
-0.43
-5.03
-9.83
-14.74
-19.70
-24.68
-29.67
-34.67

Theoretical P&L of Each Strategy Relative to Changes in Underlying Price


Strat3
Strat4
Strat5
Strat6
Strat7
-7.30
-1.64
0.82
0.00
0.00
-7.30
-1.64
0.82
0.00
0.00
-7.30
-1.64
0.82
0.00
0.00
-7.25
-1.64
0.82
0.00
0.00
-6.82
-1.57
0.79
0.00
0.00
-5.53
-1.22
0.62
0.00
0.00
-3.15
-0.31
0.09
0.00
0.00
0.19
1.39
-1.03
0.00
0.00
4.21
3.91
-2.87
0.00
0.00
8.66
7.15
-5.43
0.00
0.00
13.36
10.96
-8.64
0.00
0.00
18.20
15.17
-12.37
0.00
0.00
23.12
19.67
-16.48
0.00
0.00
28.07
24.35
-20.88
0.00
0.00
33.05
29.15
-25.48
0.00
0.00

Strat8
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat9
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat10
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Total Theoretical P&L


2.47
2.47
2.47
2.34
1.81
1.01
0.37
0.12
0.23
0.54
0.94
1.31
1.62
1.87
2.05

Underlying Price
2
5
10
15
20
25
30
35
40
45
50
55

Strat1
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat2
0.00
0.00
-0.01
-0.09
-0.32
-0.58
-0.77
-0.88
-0.94
-0.97
-0.99
-0.99

Position Delta of Each Strategy Relative to Underlying Price Changes


Strat3
Strat4
Strat5
Strat6
Strat7
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.03
0.00
0.00
0.00
0.00
0.16
0.03
-0.01
0.00
0.00
0.37
0.12
-0.06
0.00
0.00
0.58
0.26
-0.16
0.00
0.00
0.75
0.42
-0.29
0.00
0.00
0.85
0.58
-0.44
0.00
0.00
0.92
0.71
-0.58
0.00
0.00
0.96
0.81
-0.70
0.00
0.00
0.98
0.87
-0.79
0.00
0.00

Strat8
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat9
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat10
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Total Delta
0.00
0.00
0.00
-0.06
-0.15
-0.16
-0.09
-0.01
0.05
0.07
0.08
0.07

Option Trading Workbook (Deb Sahoo)

Intercept
0.00
0.00
0.00
0.00
0.00
27.42
0.00
0.00
42.48
0.00
0.00
0.00
0.00
0.00
#DIV/0!

60
65
70

0.00
0.00
0.00

-1.00
-1.00
-1.00

Underlying Price
2
5
10
15
20
25
30
35
40
45
50
55
60
65
70

Strat1
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat2
0.00
0.00
0.00
-0.03
-0.05
-0.05
-0.03
-0.02
-0.01
0.00
0.00
0.00
0.00
0.00
0.00

Underlying Price
2
5
10
15
20
25
30
35
40
45
50
55
60
65
70

Strat1
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Underlying Price
2
5
10
15
20
25
30
35
40
45

Strat1
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Option Trading Workbook (Deb Sahoo)

0.99
0.99
1.00

0.92
0.95
0.97

-0.86
-0.90
-0.94

0.00
0.00
0.00

0.00
0.00
0.00

0.00
0.00
0.00

0.00
0.00
0.00

0.00
0.00
0.00

0.06
0.04
0.03

Position Gamma of Each Strategy Relative to Underlying Price Changes


Strat3
Strat4
Strat5
Strat6
Strat7
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.01
0.00
0.00
0.00
0.00
0.04
0.01
-0.01
0.00
0.00
0.04
0.02
-0.01
0.00
0.00
0.04
0.03
-0.02
0.00
0.00
0.03
0.03
-0.03
0.00
0.00
0.02
0.03
-0.03
0.00
0.00
0.01
0.02
-0.03
0.00
0.00
0.01
0.02
-0.02
0.00
0.00
0.00
0.01
-0.02
0.00
0.00
0.00
0.01
-0.01
0.00
0.00
0.00
0.00
-0.01
0.00
0.00
0.00
0.00
-0.01
0.00
0.00

Strat8
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat9
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat10
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Total Gamma
0.00
0.00
0.00
-0.02
-0.01
0.01
0.02
0.01
0.01
0.00
0.00
0.00
0.00
0.00
0.00

Strat2
0.00
0.00
0.00
0.00
0.00
0.01
0.01
0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Position Theta of Each Strategy Relative to Underlying Price Changes


Strat3
Strat4
Strat5
Strat6
Strat7
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
-0.01
0.00
0.00
0.00
0.00
-0.01
-0.01
0.00
0.00
0.00
-0.01
-0.01
0.01
0.00
0.00
-0.01
-0.01
0.01
0.00
0.00
-0.01
-0.01
0.01
0.00
0.00
0.00
-0.01
0.01
0.00
0.00
0.00
-0.01
0.01
0.00
0.00
0.00
-0.01
0.01
0.00
0.00
0.00
-0.01
0.01
0.00
0.00
0.00
-0.01
0.01
0.00
0.00

Strat8
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat9
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat10
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Total Theta
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat2
0.00
0.00
0.00
-0.02
-0.06
-0.08
-0.08
-0.06
-0.04
-0.02

Position Vega of Each Strategy Relative to Underlying Price Changes


Strat3
Strat4
Strat5
Strat6
Strat7
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.01
0.00
0.00
0.00
0.00
0.04
0.01
-0.01
0.00
0.00
0.08
0.04
-0.03
0.00
0.00
0.10
0.08
-0.06
0.00
0.00
0.09
0.12
-0.10
0.00
0.00
0.08
0.13
-0.13
0.00
0.00
0.06
0.13
-0.15
0.00
0.00

Strat8
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat9
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat10
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Total Vega
0.00
0.00
0.00
-0.01
-0.01
0.01
0.04
0.05
0.04
0.02

50
55
60
65
70

Underlying Price
2
5
10
15
20
25
30
35
40
45
50
55
60
65
70

Option Trading Workbook (Deb Sahoo)

0.00
0.00
0.00
0.00
0.00

Strat1
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

-0.01
-0.01
0.00
0.00
0.00

Strat2
0.00
0.00
0.00
-0.01
-0.04
-0.08
-0.12
-0.14
-0.16
-0.17
-0.17
-0.17
-0.17
-0.17
-0.18

0.04
0.02
0.02
0.01
0.01

0.12
0.10
0.07
0.06
0.04

-0.15
-0.13
-0.12
-0.09
-0.07

0.00
0.00
0.00
0.00
0.00

0.00
0.00
0.00
0.00
0.00

Position Rho of Each Strategy Relative to Underlying Price Changes


Strat3
Strat4
Strat5
Strat6
Strat7
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.02
0.00
0.00
0.00
0.00
0.05
0.02
-0.01
0.00
0.00
0.09
0.05
-0.03
0.00
0.00
0.13
0.08
-0.06
0.00
0.00
0.16
0.13
-0.10
0.00
0.00
0.18
0.16
-0.14
0.00
0.00
0.19
0.20
-0.18
0.00
0.00
0.20
0.22
-0.21
0.00
0.00
0.20
0.24
-0.24
0.00
0.00
0.21
0.25
-0.26
0.00
0.00
0.21
0.26
-0.28
0.00
0.00

0.00
0.00
0.00
0.00
0.00

0.00
0.00
0.00
0.00
0.00

0.00
0.00
0.00
0.00
0.00

-0.01
-0.02
-0.03
-0.03
-0.03

Strat8
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat9
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Strat10
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00

Total Rho
0.00
0.00
0.00
-0.01
-0.02
-0.02
0.00
0.01
0.03
0.04
0.04
0.04
0.03
0.02
0.02

P&L Plots of Various Strategies Relative to Changes in Underlying Price


| Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT |
Strategy Names

Strategy Setup

Company Name
Strategy Implementation Date

NetApp Inc.
5/3/2013

Long Syntetic
NetApp Inc.

Current Stock Price $34.90

Option Exp Date1/18/2014

Long 40 Call
Short 40 Put

Call Backspread
NetApp Inc.

Current Stock Price $34.90


Short 34 Call
Long 38 Call
Long 38 Call

Option Trading Workbook (Deb Sahoo)

P&L PLOTS
Current Stock Price

$34.90

Historical Volatility

40.00%

Call Bull Spread


NetApp Inc.

Current Stock Price $34.90


Long 33 Call
Short 38 Call

Put Bull Spread


NetApp Inc.

Current Stock Price $34.90


Long 38 Put
Short 42 Put

Option Trading Workbook (Deb Sahoo)

Put Bull Spread


NetApp Inc.

Current Stock Price $34.90


Long Stock
Short 38 Call
Long 33 Put

Put Backspread
NetApp Inc.

Current Stock Price $34.90


Short 38 Put
Long 30 Put
Long 30 Put

Option Trading Workbook (Deb Sahoo)

Call Bearspread
NetApp Inc.

Current Stock Price $34.90


Short 33 Call
Long 38 Call

Put Bearspread
NetApp Inc.

Current Stock Price $34.90


Short 33 Put
Long 38 Put

Option Trading Workbook (Deb Sahoo)

Long Straddle
NetApp Inc.

Current Stock Price $34.90


Long 33 Call
Long 33 Put

Long Straddle
NetApp Inc.

Current Stock Price $34.90


Short 35 Call
Short 35 Put

Option Trading Workbook (Deb Sahoo)

Long Strangle
NetApp Inc.

Current Stock Price $34.90


Long 38 Call
Long 30 Put

Short Strangle
NetApp Inc.

Current Stock Price $34.90


Short 40 Call
Short 30 Put

Option Trading Workbook (Deb Sahoo)

Call Ratio Vertcal Ratio Spread


NetApp Inc.

Current Stock Price $34.90


Long 34 Call
Short 45 Call
Short 45 Call

Put Ratio Vertcal Ratio Spread


NetApp Inc.

Current Stock Price $34.90


Long 40 Put
Short 25 Put
Short 25 Put

Option Trading Workbook (Deb Sahoo)

Long Call Butterfly


NetApp Inc.

Current Stock Price $34.90


Short 35 Call
Short 35 Call
Long 30 Call
Long 40 Call

Short Call Butterfly


NetApp Inc.

Current Stock Price $34.90


Long 35 Call
Long 35 Call
Short 30 Call
Short 40 Call

Option Trading Workbook (Deb Sahoo)

Long Put Butterfly


NetApp Inc.

Current Stock Price $34.90


Short 35 Put
Short 35 Put
Long 30 Put
Long 40 Put

Short Put Butterfly


NetApp Inc.

Current Stock Price $34.90


Long 35 Put
Long 35 Put
Short 30 Put
Short 40 Put

Option Trading Workbook (Deb Sahoo)

Long Iron Condor


NetApp Inc.

Current Stock Price $34.90


Long 25 Call
Short 30 Call
Short 40 Call
Long 45 Call

Short Iron Condor


NetApp Inc.

Current Stock Price $34.90


Short 25 Call
Longt 30 Call
Long 40 Call
Short 45 Call

Option Trading Workbook (Deb Sahoo)

Plots of Strategy Greeks Relative to Underlying Price Changes


| Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT |
This worksheet show the changes in your option strategy Greeks relative to the change in the price of the underlying.
Company Name
Strategy Implementation Date

NetApp Inc.
5/3/2013

Option Exp Date

1/18/2014

Current Stock Price

$34.90

P&L at Expiration
0.10

2.00

0.05

1.00

0.00

0.00

-0.05
2

10

15

20

25

30

35

40

40.00%

Delta

3.00

-1.00

Historical Volatility

45

50

55

60

65

70

10

15

20

25

30

35

40

45

50

55

60

65

70

40

45

50

55

60

65

70

40

45

50

55

60

65

70

-0.10
-0.15

-2.00

-0.20
-3.00

Gamma

Theta

0.02
0.02
0.01
0.01
0.00
-0.01

10

15

20

25

30

35

40

45

50

55

60

65

70

-0.01
-0.02

0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
-0.01

10

15

20

25

30

35

-0.02

Vega

Rho

0.06

0.05
0.04

0.04

0.03
0.02

0.02

0.01
0.00
2

10

15

-0.02

20

25

30

35

40

45

50

55

60

65

70

0.00
-0.01
-0.02

-0.04

Option Trading Workbook (Deb Sahoo)

-0.03

10

15

20

25

30

35

Gamma vs. Underlying Price For Various Strike Price


| Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT |
Company Name
$
34.90
$
40.00
5/5/2013
40.00%
1/18/2014
2%
0%
258
0.71

Strike Price
40
45
50

NetApp Inc.
Underlying Price
Exercise Price
Today's Date
Historical Volatility
Expiry Date
Risk Free Rate
Dividend Yield
DTE
DTE in Years

10
0.000051
0.000012
0.000003

15
0.001937
0.000701
0.000255

20
0.010456
0.005116
0.002433

25
0.023209
0.014341
0.008403

Underlying Price
30
35
40
0.032011 0.033348 0.029126
0.023934 0.029290 0.029410
0.016630 0.023505 0.026737

45
0.022664
0.025879
0.026262

50
0.016314
0.020793
0.023282

55
0.011132
0.015672
0.019181

60
0.007320
0.011284
0.014979

Gamma vs. Underlying Price For Various Strike Price


0.040000
0.035000
0.030000
0.025000
0.020000
0.015000
0.010000
0.005000
0.000000
-0.005000

40
50

10

Option Trading Workbook (Deb Sahoo)

15

20

25

30

35

40

45

50

55

60

45

Vega vs Underlying Price For Various Strike Price


| Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT |
Company NameNetApp Inc.
$
34.90 Underlying Price
$
40.00 Exercise Price
5/5/2013 Today's Date
40.00% Historical Volatility
1/18/2014 Expiry Date
2% Risk Free Rate
0% Dividend Yield
258 DTE
0.71 DTE in Years

Strike Price
10
40 0.00001
45 0.00000
50 0.00000

15
0.00122
0.00044
0.00016

20
0.01171
0.00573
0.00272

25
0.04069
0.02514
0.01473

Underlying Price
30
35
40
0.08092 0.11484 0.13111
0.06050 0.10087 0.13238
0.04204 0.08095 0.12035

45
0.12919
0.14751
0.14969

50
0.11486
0.14639
0.16391

55
0.09487
0.13355
0.16345

60
0.07426
0.11447
0.15195

Vega vs Underlying Price For Various Strike Price


0.20000
0.15000
0.10000

40
50

0.05000
0.00000
10

15

(0.05000)

Option Trading Workbook (Deb Sahoo)

20

25

30

35

40

45

50

55

60

45

Decay of Call and Put Option Price Relative To Passage of Time


| Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT |
Company Name
$
34.90
$
40.00
5/5/2013
40.00%
1/18/2014
2%
0%
258
0.71

Call Theta
Call Option Price
Put Theta
Put Option Price

NetApp Inc.
Underlying Price
Exercise Price
Today's Date
Historical Volatility
Expiry Date
Risk Free Rate
Dividend Yield
DTE
DTE in Years

Strike Price
40
40
40
40

100
(0.0132)
1.26
(0.0111)
6.14

90
(0.0136)
1.12
(0.0114)
6.03

80
(0.0140)
0.99
(0.0118)
5.91

70
(0.0144)
0.85
(0.0122)
5.79

Days To Expiry / Passage of Time


60
50
40
(0.0147)
(0.0150)
(0.0150)
0.70
0.55
0.40
(0.0125)
(0.0128)
(0.0128)
5.67
5.54
5.41

Call Theta

20
(0.0124)
0.12
(0.0102)
5.17

10
(0.0060)
0.02
(0.0039)
5.10

1
(0.0000)
0.00
0.0022
5.10

Decay of Call Option Price

0.0000
(0.0020)

30
(0.0145)
0.25
(0.0123)
5.29

1.40
100

90

80

70

60

50

40

30

20

10

(0.0040)

1.20
1.00

(0.0060)

0.80

(0.0080)

0.60

(0.0100)

0.40

(0.0120)
(0.0140)

0.20

(0.0160)

0.00
100

90

80

Put Theta

70

60

50

40

30

20

10

10

Decay of Put Option Price

0.0050

7.00
6.00

0.0000
100
(0.0050)
(0.0100)

90

80

70

60

50

40

30

20

10

5.00
4.00
3.00
2.00
1.00

(0.0150)

0.00
100

Option Trading Workbook (Deb Sahoo)

90

80

70

60

50

40

30

20

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