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15-1 options strategies (5 implied volatility
and volatility skew…
15-1 options strategies
1 introduction
derivatives
financial instruments through which counterparties agree to exchange economic cash flows based on the movement of underlying securities, indexes,currencies or other instruments or factors
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options
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nonlinear payoffs - benefit from movements in the underlying in one direction without being hurt in opposite direction
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for hedging risk exposures
for seeking to profit from anticipated market moves
for implementing desired risk exposures cost-effective
2 position
equivalencies
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synthetic put and call
put-call parity: the equivalence of
a put + the underlying and a call + a risk-free bond
S_0 + p_0 = c_0 + X/((1 + r)^T)
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the symmetrical payoffs of long and short stock,forward and futures positions can altered by implementing synthetic options positions
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