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| Chapter 25 - Options Strategies |
| 396 |
Table 25-2
| Price at Expiry |
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Out of the Money |
At the Money |
In the Money |
Long GE |
| | | | | | |
| $60 |
Value:
Profit: |
+$6,000.00
+$1,960.00 |
+$6,000.00
+ $1,730.00 |
+$6,000.00
+$770.00 |
+$6,000.00
+$2,000.00 |
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| 397 |
At the bottom of the page
Short put is exercised (S < $30)
Profit = - 100 ($30 - S) + $1060 = 0
S = $30 - $10.60
S = $19.40
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Short call is exercised ($30 < S)
Profit = - 100 (S - $30) - $1060 = 0
S = $30 + $10.60
S = $40.60
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| 398 |
In Table 25-9 the value and profit labels are ambiguous. The value line is at $0 at $30 where both the put and the call expire worthless. The value line is never positive; the profit line can never be in negative territory throughout the entire range; no one would ever invest in such a strategy.
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| 398 |
25.4 Strangle
A strangle is similar to a straddle but the exercise price of the call is
different from
the exercise price of the put.
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| 398 |
At the bottom of the page
John exercises long put (S < $35)
Profit = 100 ($35 - S) - $360 = 0
S = $35 - $3.60
S = $31.40
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John exercises long call ($45 < S)
Profit = 100 (S - $45) - $360 = 0
S = $45 + $3.60
S = $48.60
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| 399 |
In Table 25-10 the value and profit labels are reversed. The value line is horizontal at $0 between $35 and $45 where both the $35 put and the $45 call expire worthless.
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| 400 |
In the table above Figure 25-12 the short call is exercised and the breakeven price is calculated as
II = -100 (S-$30) + $770
S = $30 + $7.70
S = $37.70
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| 401 |
In Table 25-3
| Price at Expiry |
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Bear Spread |
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| $35 |
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-$500.00
+$270.00
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| 402 |
In Table 25-4, in the top cell of the middle column the description should be
10,000 shares at $40 not 40,000 shares at $40
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