2 option strategies

8/8/2019 2 Option Strategies

1/10

ab2

Basic Option Strategies

FX Derivatives Seminar27th November 2004

Raphael Drescher


2/10

ab21

Commonly Used Strategies

Risk Reversal

Bull-/ Bearspread

Seagull

Straddle/ Strangle


3/10

ab22

Risk Reversal

Go long via RR as alternative to forward

Example (spot 1.3000):

Buy 2m 1.3500 EUR Call/ USD Put Sell 2m 1.2500 EUR Put/ USD Call

Zero premium

-0.1500

-0.1000

-0.0500

0.0000

0.0500

0.1000

0.1500

1.15 1.25 1.35 1.45

EURUSD Spot a t Expiry

P&

L

atexpiry

RR Payout


4/10

ab23

Bull-/ Bearspread (Call-/ Put- Spread)

Go long via Bull (or Call) Spread as alternative to forward or plainvanilla option


Buy 2m 1.3000 EUR Call/ USD Put

Sell 2m 1.3500 EUR Call/ USD Put

Premium: 0.0145 USD per EUR ( plain vanilla would cost 210 USD pips)

-0.0300

-0.0200

-0.0100

0.0000

0.0100

0.0200

0.0300

0.0400

0.0500

1.25 1.30 1.35 1.40

EURUSD Spot at Expiry

P&L

atex

piry

Spread Payout


5/10

ab24

Bull-/ Bear Seagull

Go long via Seagull as alternative to forward or plain vanillaoption



Sell 2m 1.3700 EUR Call/ USD Put

Sell 2m 1.2700 EUR Put/ USD Call

Zero premium

-0.0300

-0.0200

-0.0100

0.0000

0.0100

0.0200

0.0300

0.0400

0.0500

0.0600

1.25 1.27 1.29 1.31 1.33 1.35 1.37 1.39


P&L

ate

xpiry

Bull Seagull Payout


6/10

ab25

Straddle

Go long/ short via Straddle


Buy 2m 1.3000 EUR Call/ USD Put Buy 2m 1.3000 EUR Put/ USD Call

Premium 0.0400 USD per EUR

Break-Even 1.2600 and 1.3400

-0.0500

0.0000

0.0500

0.1000

0.1500

1.15 1.25 1.35 1.45


P&L

atex

piry

Straddle Payout


7/10

ab26

Strangle

Go long/ short via Strangle



Buy 2m 1.2800 EUR Put/ USD Call

Premium 0.0230 USD per EUR

Break-Even 1.2570 and 1.3430

-0.0500

0.0000

0.0500

0.1000

1.20 1.25 1.30 1.35 1.40


P&L

atexp

iry

Strangle Payout


8/10


9/10


10/10

2 option strategies

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