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strips

strips. and. straps. alvinyannykerenkrish2011.10.11. One day…. UGH. I’m so bearish . I’m assuming volatility but I actually have a little downwards bias. I think the stock price is more likely to fall than rise . Hmm…AHA!! I know, I’m gonna STRIP !!!!!. To make a STRIP:.

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strips

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  1. strips and straps alvinyannykerenkrish2011.10.11

  2. One day…. UGH. I’m so bearish. I’m assuming volatility but I actually have a little downwards bias. I think the stock price is more likely to fall than rise. Hmm…AHA!! I know, I’m gonnaSTRIP!!!!!

  3. To make a STRIP: • modified straddle by adding a put option • 1 long call + 2 long puts • same strike price and same exercise date

  4. STRIPS Profit strike price = 25 c/p = 5 35 • If the stock price decreases, the investor gains twice as much profit than if the stock value increased 20 5 20 30 25 0 Stock price -5 -15

  5. When you feel that it’s gonna be more… DOWN STRIP!

  6. One day... again…. JEEZ, I’m feeling bullish. I wanna profit from the large deviation of the stock price from the strike price. But I think it’s more likely to rise than fall so I’m gonnaSTRAP!!!!! Hoorah

  7. To make a STRAP: • modified straddle by adding a call option • 1 long put + 2 long calls • same strike price and same exercise date

  8. STRAPS Profit strike price = 25 c/p = 5 35 • If the stock price increases, the investor gains twice as much profit than if the stock value decreased 20 5 20 30 25 0 Stock price -5 -15

  9. When you feel that it’s gonna be more… UP STRAP!

  10. fin.

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