liam mescall fin engineering 2

8/4/2019 Liam Mescall Fin Engineering 2

1/16

Report on Option Trad-

ing Strategies and theirGreeks

FI6022

Financial Engineering

Dr. Mark Cummins

Liam Mescall (0144126)

4/15/2011


2/16

Part A

Payoff Profile:

This position consists of a short share position and a short put position. Profits are made on

when the share price decreases but theseprofits are stopped once the strike price of the

put is reached as anything after that point must

be paid out to the holder of the put position.

The graph here shows the effect of an

increasing stock price where losses are

unlimited as share price rises. Losses are

slightly reduced in this case by the premium

earned for the sale of the put option. Profits

are limited with unlimited potential losses.

Rationale:

From the perspective of the investor this strategy is undertaken predicting a downward

movement in the underlying to the 45 mark or beyond and are happy to profit only to the

$45 mark and earn a premium from the sale of the put option. Earnings from the sale of the

premium will give profit if no movement noted, all things held equal, (share will have to be

bought back) or reduce losses if an increase in profit noted.

Type of Market:

The investor will be bearish on the market.

Income/Cost:

There will be a net income from the sale of the share and the sale of the premium on the

sale of the option. Revenues earned on the share will have to be used to buy back the share

in the future. If ITM and wish to close out option, revenues from sale will be used to

repurchase.

Risks:

Delta; at the 40 level in the below graph we see the short stock with a delta of -1 is much

greater than the positive delta of the short put position. Taking the 1m curve, the stockprice increase sees a net increase in the sensitivity of the delta as it moves from being ITM

40 42 44 46 48 50 52 54 56 58 60-10

-8

-6

-4

-2

0

2

4

6

8Strategy Payoff Profile at Put expiry

Stock Price at Put expiry

Payoff

6m

3m

1m

Expiry


3/16

(position is short) to ATM at 45 arriving

at a delta of -.5. This tells us the delta

value of the share is still -1 and the put

has a positive delta value of +.5.

As the position moves further frombeing ITM to OTM (i.e. above 50) the

positive delta of the put has less impact

and the total delta value tends towards

-1 which is the delta value of the share

itself. All maturities will be subject to

conditions described for the 1m but to a

lesser extent as the length of time

grows. This effect causes different levels of Delta to be noted at different stock prices

causing peaks at three different times. When ATM the rate of change of the option value

steepens-as maturity approaches a minor decrease in share price will have a large decreasein option value affecting profitability.

Gamma; as the gamma of a stock is zero the position is influenced by the short put negative

gamma which begins negative for all maturities. Again, taking the most pronounced 1m

curve, as the put option moves from ITM towards being ATM the sensitivity of the gamma

increases as the rate of change of delta becomes more sensitive. Once OTM, the rate of

change is reduced and this trend continues as the option moves further and further OTM

until resting at -1 which means for

every change in the underlying there is

an opposite noted in the rate of change

of delta. All maturities will be subject to

conditions described for the 1m but to

a lesser extent as the length of time

grows as seen in pronouncement of

curves. This effect causes different

levels of Gamma to be noted at

different stock prices causing peaks at

three different times. The risk of a large

Gamma when ATM and approaching

maturity is losses as a result of a small

change in share price as noted above.

Vega; as a stock has a Vega of zero, the

position is again influenced by the short

put position which carries a negative

value. The impact of time is obvious

here with longer maturities more

sensitive to volatility than shorter dated

options.

40 42 44 46 48 50 52 54 56 58 60-1

-0.9

-0.8

-0.7

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0Strategy Delta Profile at Initiation

Stock Price

Delta

6m

3m

1m

40 42 44 46 48 50 52 54 56 58 60-1.15

-1.1

-1.05

-1Strategy Gamma Profile at Initiation

Stock Price

Gamma

6m

3m

1m

40 42 44 46 48 50 52 54 56 58 60-14

-12

-10

-8

-6

-4

-2

0Strategy Vega Profile at Initiation

Stock Price

Vega

6m

3m

1m


4/16

Clearly we can see the difference between the vega values which widen as the position

becomes more ITM telling us, the further the position is ITM then the greater the probability

of the option finishing ITM i.e. the longer there is the more scope there is for volatility to

bring the option back OTM which is reflected in the larger negative Vega value. From 40-60

we see that approaching the put strike the sensitivity increases drawing the Vega further

negative before tending back towards positive values as the option becomes further andfurther OTM.

Theta; again we see that the theta of a stock is zero leaving the curves at the mercy of the

put options theta value which is positive. We can

see that how positive that figure is becomes a

function of maturity with different curves for each.

Taking the 1m we can see that as the option

approaches being ATM, the sensitivity of the

positive theta increases until it peaks slightly

before the strike price. This positive theta adds

value to the option as we have sold it.

Once OTM the sensitivity rapidly approaches zero

theta value and continues this trend as it arrives

further and further away. All maturities will be

subject to conditions described for the 1m but to a lesser extent as the length of time grows.

This effect causes different levels of theta to be noted at different stock prices causing peaks

at three different times.

Time Horizon:

An appropriate time horizon for this strategy is the medium term. With relatively low

volatility of 25% it may take some time for the underlying to move. During this time, positive

theta will be earned as option was sold.

Name: The negative bear

40 42 44 46 48 50 52 54 56 58 600

1

2

3

4

5

6

7Strategy Theta Profile at Initiation

Stock Price

Theta

6m

3m

1m


5/16

Part B:

Payoff Profile:

Observing the profile we see that the position is net long the underlying and makes a loss

when ATM (at 50). This is because of the cost of the three long positions and the fact thatyou are long two and short one i.e. exposed to

the down side unless a very large down

movement is noted in which case the put

option would be deeply ITM.

As the underlying increases we see the position

instantaneously move from loss making to

retracing losses through the upswing in the two

long positions. There are limited losses with

unlimited potential profits.

Rationale:

This is a volatility trade when the investor does not know where the market will go but has a

slight preference for the upside, hence the net long bias.

Type of Market:

The investor will want a highly volatile market for this trade.

Income/Cost:

There will be an initial cost for this position as it involves the purchase of three options.

Risks:

Delta; the position consists of two ATM

long calls (both positive delta) and one

long put (negative delta). As the call

options are far OTM at 40 they are greatly

reduced and the put delta approaches -1

(far ITM) leaving a negative total for the

position.

As the underlying increases, the -1 value

of the long put decreases with a

corresponding increase in the longpositions taking the net position to .5 at

40 42 44 46 48 50 52 54 56 58 60-1

-0.5

0

0.5

1

1.5


Stock Price

Delta

6m

3m

1m

40 42 44 46 48 50 52 54 56 58 60

-15

-10

-5

0

5

10

15

20Strategy Payoff Profile

Stock Price

Payoff

6m

3m

1m

Expiry


6/16

the 50 strike as you would expect for an ATM position with two calls and one put. All

maturities will be subject to conditions described for the 1m but to a lesser extent as the

length of time grows. This effect causes different levels of Delta to be noted at different

stock prices causing peaks at three different times. The main risk to this position is low

volatility. The high delta when ATM is beneficial to the position as long as movements in the

underlying are in one direction and to a point where cost of options are covered. Worst casescenario is where there is little movement in underlying and option cost not covered.

Gamma; both long put and long call positions both have positive gamma which is evident

from the positive values below. Positive gamma means the delta of long calls and long puts

will become more positive and move toward +1.00 when the stock prices rises, and less

positive and move toward 0.00 when the

stock price falls.

In the graph we see this clearly as there is aconstant growth in the positions gamma

consistent across all maturities. The shorter

maturities note steepness in the rate of

gamma increase as the options become

ATM. Shorter maturities bring with it a

greater sensitivity to delta movements

which is evident in the rate of change of

gamma. Positive Gamma positions carry

little risk.

Vega; similar to gamma, long put and long call positions both have positive Vega. This is

clear from the below graph where at all points, no negative Vega value is noted. Taking the

1m value we see an increase in the rate of change of the option for a 1% change in volatility.

This occurs as the options approach being ATM,

when the sensitivity of the Vega is at its

greatest.

Passing the strike and entering ITM we see thissensitivity reduced again as the rate of change

slows. All maturities will be subject to

conditions described for the 1m but to a lesser

extent as the length of time grows. This effect

causes different levels of Vega to be noted at

different stock prices causing peaks at three

different times.

40 42 44 46 48 50 52 54 56 58 600

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2Strategy Gamma Profile at Initiation

Stock Price

Gamma

6m

3m

1m

40 42 44 46 48 50 52 54 56 58 600

5

10


Stock Price

Vega

6m

3m

1m


7/16

Theta;theta is highest for ATM options, and is progressively lower as options are ITM and

OTM. This makes sense because ATM options have the highest extrinsic value, so they have

more extrinsic value to lose over time than an

ITM or OTM option. The theta of options is

higher when either volatility is lower or there are

fewer days to expiration as illustrated per graph.

The 1m here moves steeply positive as the 50

strike comes closer but the sensitivity then

reduces again as position moves ITM. All

maturities will be subject to conditions described

for the 1m but to a lesser extent as the length of

time grows. This effect causes different levels of

theta to be noted at different stock prices

causing peaks at three different times.

Time Horizon:

I would take a medium term horizon as ATM options in the short term can be expensive.

The cheaper options will reduces costs but allow for a similar exposure to movement from

the expected volatility. That is my preference but more money could be made from a

shorter horizon as options would become further valuable with shorter maturity.

Name: The long V

40 42 44 46 48 50 52 54 56 58 60-7

-6

-5

-4

-3

-2

-1

0

1

2

Strategy Theta Profile at Initiation

Stock Price

Theta

6m

3m

1m


8/16

Part C

Payoff Profile:

This diagram describes a position where an OTM put is bought along with a stock and an

OTM call is sold. This makes profits range bound and reduces potential losses from a suddendrop in price of the underlying. The position

starts as negative with the cost of the put

and the loss on the share held. Losses on the

put position are confined to losses to the

level noted per graph.

At the 45 mark the put is no longer ITM.

Steepness of the slope shows the losses that

would be made without the presence of the

put. The increasing value of the share brings

the slope steeply to the 55 mark after whichpoint the call becomes ITM and we must pay

out any increases we benefit from on the

further rise of the share price to the option holder. Profits and losses are limited.

Rationale:

In this strategy the shareholder wishes to earn a premium from the sale of a call option,growth in the underlying and protect himself from a sudden decline in the market. Upside

growth is expected.

Type of Market:

The investor in this strategy is bullish and will maximize profits at the 55 and above as he

will profit from the rise in value of his share from 50 to 55.

Income/Cost:

There will be a cost to this transaction when taking the price of the share into account

assuming it is around the $50 mark. The price of the OTM options will be a fraction of this

and will largely offset each other.

Risk:

Delta; the position is long a put (negative delta),

short a call (negative delta) and long a stock

(positive delta of +1). The sum of these positions

differs depending on each maturity as illustrated

below. Taking the most pronounced i.e. the 1m, we

see the delta starts increasing as the 45 markapproaches and the put position is ATM. Following

35 40 45 50 55 60 65-6

-4

-2

0

2

4


Stock Price

Payoff

6m

3m

1m

Expiry

35 40 45 50 55 60 650

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9Strategy Delta Profile at Initiation

Stock Price

Delta

6m

3m

1m


9/16

on from this the share held approaches 1 (as it will have a delta of 1 with itself) but does not

reach one as it is combined with the put option delta value.

As the price continues to rise, the call option at strike of 55 brings further negative delta to

the position which continues at a slower pace until zero is reached. All maturities will be

subject to conditions described for the 1m but to a lesser extent as the length of time grows.This effect causes different levels of delta to be noted at different stock prices causing peaks


Gamma; considering the initial position is long a

put with a positive gamma, short a call with a

negative gamma and long a stock with a zero

gamma we can see at 35 that the positive gamma

on the put is larger than the negative gamma of

the call as the stock price is so low. As the stockprice increases the gamma becomes more

sensitive approaching the 45 strike.

Following this point, as the put becomes more and

more OTM, the influence of the negative gamma

in the call becomes more evident as it approaches being ATM. Once ITM, the sensitivity

decreases and gamma approaches +1 levels again. All maturities will be subject to

conditions described for the 1m but to a lesser extent as the length of time grows. This

effect causes different levels of Gamma to be noted at different stock prices causing peaks


Vega; the position is long a put with positive

Vega and short a call with negative vega. The

stock has zero Vega. Taking the 1m, at 35 we

see the positive Vega equals the negative and

position starts to grow as the put strike of 45

is approached I.E. as stock price increases, so

does Vega. Following this the negative Vega of

the short call position becomes larger with theOTM put Vega becoming smaller which is

clearly seen in the declining slope.

This peaks at the 55 strike when it becomes ITM and sensitivity reduces again towards zero

when the put is deeply OTM and call is deeply ITM (from investors perspective). All

maturities will be subject to conditions described for the 1m but to a lesser extent as the

length of time grows. This effect causes different levels of Vega to be noted at different

stock prices causing peaks at three different times.

35 40 45 50 55 60 650.9

0.95

1

1.05

1.1

1.15Strategy Gamma P rofile at Initiation

Stock Price

Gamma

6m

3m

1m

35 40 45 50 55 60 65-12

-10

-8

-6

-4

-2

0

2

4

6


Stock Price

Vega

6m

3m

1m


10/16

Theta; the long put position has a negative theta while the short call has a positive theta.

Positive theta/time decay works in our favour. The stock position has zero theta. At the 35

mark we can see that the positive theta is

greater than the negative leaving all three

maturities positive.

Taking the 1m maturity we see that the

increase of the underlying towards the strike

of 45 makes the negative put more sensitive

and accordingly notes a rise in negative

theta. Once the position becomes ITM the

sensitivity reduces and continues to do so.

With the strike of the positive short call

position approaching it becomes larger still

until peaking ATM and decreasing once ITM

towards the initial levels noted. All maturities will be subject to conditions described for the1m but to a lesser extent as the length of time grows. This effect causes different levels of

theta to be noted at different stock prices causing peaks at three different times.

Time Horizon:

As a positive theta has been established, I would hold this position into the medium term

hoping for gradual growth in the underlying towards the 55 level.

Name: The snake

35 40 45 50 55 60 65-8

-6

-4

-2

0

2

4

6

8

10


Stock Price

Theta

6m

3m

1m


11/16

Part D

Price Profile:

Initial cost of the ATM position is more than revenues earned from the sale of the two OTM

short positions as ATM options tend tobe expensive. As the price of the

underlying increases as the long position

becomes more and more in the money.

Upon reaching the 55 level, the first of

the two sold call options becomes ITM

generating expenses (from being liable to

pay out when exercised) that equal

revenues, straightening the line per

graph.

As the underlying price continues toincrease, the larger position sold short

compared to long (i.e. 2:1 ratio, short:

long) cause a profit neutral position to change to a loss making position the further the price

increases. The initial cost changes with time to maturity as the proximity affects the option

price as seen in graph. Profits are limited with unlimited potential losses.

Rationale:

From an investors perspective this transaction would be undertaken with the viewpoint that

the price of the underlying will increase past 50 but not past 60. In this instance the investor

will have bought a long position and offset much of the cost of it through the sale of call

options. Should the price not breach 50 then none of the sold options will be exercised and

a profit made by extent long position ITM minus opening cost of position. Profits are

maximised between 55 and 60 at which point they become neutral before decreased

profitability at any point past 60.

Type of Market:

The market sought by the investor is moderately bullish i.e. a 10% increase in the value of

the underlying or to anywhere between 55 and 60. At this level profits will be maximised.

Income/Cost:

There will be a net cost to the transaction as ATM options are far more expensive than OTM

options. Revenues from the sale of OTM options will offset some of the cost.

45 50 55 60 65-2

-1

0

1

2

3

4

5

Strategy Payoff Profile

Stock Price

Payoff

6m

3m

1m

Expiry


12/16

Risk:

Delta; with the underlying price rising, deltas react differently for each maturity. The delta

has an initial positive position as we are long an ATM call (positive delta) which will have a

higher delta value than the sum of two

OTM call deltas which I am short (negativedelta). As the share price increases the

delta peaks between 50 and 55 reflecting

the sensitivity of ATM long call.

As the underlying approaches the 55 mark

the first of the short positions delta begins

to increase as it becomes ATM reducing

overall position net delta. This continues to

increase to the second short position and

as the first and second become further

ITM, the larger their deltas become,

making the overall position increasingly negative. All maturities will be subject to conditions

described for the 1m but to a lesser extent as the length of time grows. This effect causes

different levels of Delta to be noted at different stock prices causing peaks at three different

times.

Gamma; similarly, we see a corresponding level of pronouncement differences in the

gamma greek. Taking the 1m mark we see to the 50 level, gamma is rising as delta

sensitivity increases as the long position becomes ATM. The points of most sensitivity are

when the underlying approaches the

strike price. This is when the delta is

most sensitive i.e. ATM. Between 50 and

55 the position takes on negative gamma

as the long position moves away from

ATM becoming less sensitive to delta. As

the 55 mark approaches, the Gamma for

the short positions (negative) increase

continuously until the 60 level is

approached. After this point the position

will remain gamma negative but at a

lower level which is seen as the curve

retraces towards zero.

The shorter the maturity the greater the sensitivity of gamma to changes in the underlying.

All maturities will be subject to conditions described for the 1m but to a lesser extent as the

length of time grows. This effect causes different levels of Gamma to be noted at different

stock prices causing peaks at three different times. The risk of a large, negative gamma

means it will generate deltas that are unfavourable for up/down movements in the stock.

45 50 55 60 65-1

-0.5

0

0.5Strategy Delta Profile at Initiation

Stock Price

Delta

6m

3m

1m

45 50 55 60 65-0.15

-0.1

-0.05

0

0.05

0.1Strategy Gamma Profile at Initiation

Stock Price

Gamma

6m

3m

1m


13/16

Vega; taking the 1m maturity, we see the Vega is initially positive Vega as the long ATM

position Vega is greater than the sum of the two short positions Vegas. As the long position

moves from being ATM to ITM the Vega

becomes less sensitive to change, with the

increasing closeness of the negative Vega short

call at 55 the overall negative position continuesto increase.

This pattern repeats itself getting closer to 60

before all positions become ITM and the

sensitivity to change reduces. Again the effect of

a shorter maturity on this position is to

pronounce the shape of the curve as it becomes

more sensitive to changes in the underlying at

maturity. As time to maturity increases, there is a

reduction in these effects noted for the 1m.

Theta; at 45 there is a variety of starting points for theta depending on the maturity horizon

of the position. Long positions have a negative theta while short are positive theta. We can

see that the 1m starting point has net negative

theta as the ATM long negative theta position is

greater than the sum of the OTM short positive

theta positions. This negative sensitivity

increases as the long position approaches the

strike before fading away when it becomes ITM.

As the OTM short positions with positive theta

approach there is a sharp movement towards

positive theta which reaches its peak before the

60 strike and falls away then as all become ITM

as the rate of change of all the positions reduces.

All maturities will be subject to conditions

described for the 1m but to a lesser extent as the length of time grows. This effect causes

different levels of theta to be noted at different stock prices causing peaks at three different

times.

Time Horizon:

I would choose a medium term horizon to give the position time to grow to the 55-60 range

described given the modest volatility of 25%. There would be less volatile theta in the

interim for this time horizon.

Name: The Table

45 50 55 60 65-25

-20

-15

-10

-5

0


Stock Price

Vega

6m

3m

1m

45 50 55 60 65-10

-5

0

5

10

15


Stock Price

Theta

6m

3m

1m


14/16

Part E

Price Profile: The initial cost of the low-strike is seen in the dip in payoff as the option sold

continues to cost the seller more as price increases. After the 55 mark the two long

positions become ITM and generate

revenues greater than those to be paid onthe short position, described by the

continuous increasing payoff as the stock

price increases.

This strategy will profit in times of large

volatility in either direction but will suffer

losses should the underlying stay within a

tight range i.e. between 50 and 55 per

graph. There are limited losses for this

position and unlimited potential profits.

Rationale:

This option strategy is utilized when you believe there will be a lot of volatility in the stock

but are not 100% sure whether it will move up or down. If the stock spikes up, as shown in

graph, you will earn a profit. If the stock moves a lot, but in the opposite direction, you will

earn a small profit. However, if the stock doesn't move much and is stuck in a trading range,

you will make a loss.

Type of Market:

The market sought by the investor is volatile in either direction but preferable upwards

stock growth.

Income/Cost:

As you are selling a call option that is ATM and buying 2 call options that are OTM, this posi-

tion should be a credit position i.e. earns a premium from opening position. However, be-cause you are selling an option, you are not able to allow this position to expire. You will

need to buy back the option before expiration date, which is one of the risks of the position.

Risks:

If the stock price stays below the strike price of the sold call option (the ITM price), you can

allow the position to expire since none will be exercised. Profit in this case is the initial pre-

mium made when position was opened. If the stock moves above that ATM strike price but

is still below the strike of the 2 calls you are facing losses. The 2 calls with the OTM strike

price would still be worthless, but the call you sold at the ATM strike price would be worthsomething and will need to be bought back before expiration. This will maximise losses.

45 50 55 60 65 70-6

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0

2

4

6

8

10


Stock Price

Payoff

6m

3m

1m

Expiry


15/16

Delta; at 45 as the position is net negative delta i.e. long positions have a positive delta but

the sum of their two deltas are less than the ATM call being sold which is negative. As the

negative delta position hits the approaches 50

it becomes more sensitive as ATM, after 50 areduction in delta is noted as the pace of

change when ATM is far greater than ITM. As

55 approaches, the two long positions with

see their positive delta values increase making

the whole position delta positive. This increas-

es at a decreasing rate past the 60 mark as all

positions become ITM and tend towards one.

All maturities will be subject to conditions de-

scribed for the 1m but to a lesser extent as the

length of time grows. This effect causes different levels of delta to be noted at different

stock prices causing peaks at three different times.

Gamma; the Gamma position at 45 is negative meaning the Gamma values are smaller for

the two long OTM calls (positive) than the one ATM short call (negative) for the 1m maturi-

ty. This is not the case as maturity lengthens,

as we can see the larger Gamma in the OTM

options give the initial Gamma position a net

positive value on the 6m maturity. Taking the

1m, the position becomes further sensitive to

change as the short position approaches its

strike. This then retreats towards zero before

the strike at 55 approaches.

The two long positions have larger positive

Gamma at this point giving a steep inclination

to the peak at 55. When all positions are ITM

the Gamma retreats again towards zero re-

maining marginally positive as a reflection of the extent the long positions have greater

gamma than the short. All maturities will be subject to conditions described for the 1m but

to a lesser extent as the length of time grows. This effect causes different levels of gamma

to be noted at different stock prices causing peaks at three different times.

Vega; as with the Gamma position, the starting points for maturities vary i.e. 6m maturity

gives the initial Vega a positive position as the long positions with positive Vega have larger

Vega than the negative Vega in the short position. The 1m position starts with net negativeVega i.e. the sum of the two long positions Vega is smaller than the ATM short position. We

45 50 55 60 65 70-0.1

-0.05

0

0.05

0.1

0.15

0.2

0.25Strategy Gamma Profile at Initiation

Stock Price

Gamma

6m

3m

1m

45 50 55 60 65 70-0.4

-0.2

0

0.2

0.4

0.6

0.8


Stock Price

Delta

6m

3m

1m


16/16

see an increase in negative Vega as the 50 strike

approaches. This negative Vega means the value of

an option decreases when volatility increases and

increases when volatility decreases. These options

are most sensitive when ATM, and accordingly

when entering ITM, the levels of Vega reduces. Asthe two positive Vega long positions at 55 become

closer there is a sharp increase in the positive Vega.

This is briefly constant at 55 until all positions move

ITM and the sensitivity reduces leaving Vega mod-

erately above zero reflecting the marginally positive net value. All maturities will be subject

to conditions described for the 1m but to a lesser extent as the length of time grows. This

effect causes different levels of Vega noted at different stock prices causing peaks at three

different times.

Theta; at 45 there is a variety of starting points for theta depending on the maturity horizon

of the position. The 1m position is positive as the short ATM call option (positive theta) is

greater than the sum of the two long

positions. This is not the case for the 6m

where the opposite is true. Taking the 1m

which is the most pronounced, there is an

increase in sensitivity as the short position

becomes more sensitive to the loomingstrike.

Once it becomes ITM, the sensitivity

declines and continues to decline as the

negative theta long call positions approach.

Once the 55 mark is hit and all positions

are ITM, the theta values decline and approach zero. Again the level of pronouncement

depends on the time to maturity. All maturities will be subject to conditions described for

the 1m but to a lesser extent as the length of time grows. This effect causes different levels

of theta noted at different stock prices causing peaks at three different times.

Time Horizon:

A short term horizon will ensure you are not losing money as time passes by as you will

generate positive theta. The strategy is also depending on large volatility or event driven

occurrences in the marketplace. As such a short investment horizon is best.

Name: The tick

45 50 55 60 65 70-5

0

5

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15


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Vega

6m

3m

1m

45 50 55 60 65 70-20

-15

-10

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The

ta

6m

3m

1m

liam mescall fin engineering 2

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