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158 CHAPTER 6 WingSpreads Vega Vega EXHIBIT 6–9 Vega of 100*99/100/101 Butterfly - View - Over Price Movement Futures Style Margining with a Flat Volatility of 10% for 57 Days 1469 997 526 54 -417 -889 -1360 -1832 -2303 -2775 -3246 1469 997 526 54 -417 -889 -1360 -1832 -2303 -3246 86.00 Current Day 86.00 89.30 92.60 95.90 99.20 102.50 106.40 110.30 114.20 92.60 98.90 Underlying Price Underlying Price 105.80 112.40 www.RiskDoctor.com www.RiskIllustrated.com 9 18 27 39 51 Expiration Day Days Forward
166 CHAPTER 6 WingSpreads OPTIONS MATRIX Let us take a look at how the ‘Options Matrix’ (Exhibit 6–17) helps to place all these related spreads in perspective. Many of the following exhibits use these prices in the matrix. You can see the relationships between the individual call and put prices and the impact they have on verticals, butterflies, condors and so on. The strikes are labeled in the center horizontal line. Call and call spread prices are in the upper half of the exhibit. EXHIBIT 6–17 Call Butterfly Options Matrix Pregnant C-Bfly 3.70 4.00 3.35 2.30 Call Condor 1.65 2.05 1.95 1.40 0.90 0.75 0.90 1.15 0.80 0.60 0.30 Call Vertical 4.65 3.90 3.00 1.85 1.05 0.45 0.15 Call 15.15 10.50 6.60 3.60 1.75 0.70 0.25 0.10 Strike 85 90 95 100 105 110 115 120 Put 0.15 0.50 1.60 3.60 6.75 10.70 15.25 20.10 Put Vertical 0.35 1.10 2.00 3.15 3.95 4.55 4.85 Put Butterfly 0.75 0.90 1.15 0.80 0.60 0.30 Put Condor 1.65 2.05 1.95 1.40 0.90 Pregnant P-Bfly 3.70 4.00 3.35 2.30 Put and put spread prices are displayed in the lower half of the exhibit while call and call spread prices are in the upper half. The butterfly prices are in the third set of rows further out from the center. The fourth rows out have the condor prices, which are simply the sums of the two adjacent butterfly prices from one row closer to the center. The top and bottom rows show values of the pregnant or two-strike butterflies. In this example, there are 4 baby butterflies in each twostrike butterfly. Note that when you add the call verticals to the put verticals they all add up to 5.00, the box value (zero interest rate for simplicity). Also note that the call wingspreads equal the value of the put wingspreads. The first rows away from the center row show each of the individual call prices (above) and put prices (below). The next rows out have the vertical values, i.e. the difference between the two adjacent strikes. www.RiskDoctor.com www.RiskIllustrated.com
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OPTIONS TRADING: THE HIDDEN REALITY
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To Sarah, JoJo, Austin and Mom Than
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vi Praise “My goal this past year
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viii Coulda Woulda Shoulda Most peo
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x Coulda Woulda Shoulda not true. T
Page 12 and 13: xii Coulda Woulda Shoulda “Tell m
Page 14 and 15: xiii Contents CONTENTS Excerpt Page
Page 16 and 17: xv Contents Assessing Risk in Ratio
Page 18 and 19: xvii Contents Closer to Delta Neutr
Page 20 and 21: Options Trading: The Hidden Reality
Page 48 and 49: 38 CHAPTER 2 A Just Cause for Adjus
Page 50 and 51: 7 44 CHAPTER 2 A Just Cause for Adj
Page 56 and 57: 106 - 107 CHAPTER 4 Straddles and S
Page 58 and 59: 118 CHAPTER 5 Verticals (Bull and B
Page 60 and 61: 134 & 135 CHAPTER 5 Verticals (Bull
Page 66 and 67: 170 CHAPTER 6 WingSpreads WINGSPREA
Page 68 and 69: 172 CHAPTER 6 WingSpreads evolved p
Page 70 and 71: 193 CHAPTER 7 Multi-Expiration Spre
Page 72 and 73: 226 CHAPTER 9 Hybrid Hedging CHAPTE
Page 74 and 75: 232 CHAPTER 9 Hybrid Hedging EXAMPL
Page 76 and 77: P&L P&L P&L P&L Options Trading: Th
Page 78 and 79: EXHIBIT 10-15C Supply-Products Skew
Page 80 and 81: 308 CHAPTER 11 Option Dialogue CHAP
Page 82 and 83: 316 CHAPTER 11 Option Dialogue Actu
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Page 86 and 87: 407 Index Collar, (Fence or Tunnel
Page 88 and 89: 409 Index Naked, 3-4, 16, 32, 79, 9
Page 90: 411 Index Stress testing (see What-
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