Long Strangle Strategy Using Barrier Options and its Application in Hedging Against a Price Increase
Abstract This paper presents hedging analysis against an underlying price increase by using Long Strangle strategy formed with vanilla and barrier options. More specifically, up and knock-in call option and standard barrier put options are used. The main theoretical contribution is to specify profit functions for this strategy followed by derivation of cost functions for secured position. The strategy is applied to real option data for SPDR Gold Shares (GLD). The costs of options in strategy to form secured position are investigated for different values of barriers with fixed strike prices. Furthermore, the mutual effect of variation in requested costs or call/put option strike price or call option barrier is analysed.
Choosing the right options trading strategy: Risk-return trade-off and performance in different market conditions
The investment decisions are subjected to risk and return of the financial asset. Options strategies help employ a suitable strategy to balance the risk-return trade-off. The study analyzes the risk-return trade-off of the long straddle, long strangle, long call butterfly (LCB), short straddle, short strangle, and short call butterfly (SCB) strategies. Moreover, it measures the impact of strategy risk and options premiums on strategy return using panel data analysis. Additionally, the study evaluates the performance of options strategies using the excess returns to risk approach under neutral and volatile market conditions. This paper considered companies of top-six sector indices of the National Stock Exchange from 2009 to 2020 and collected data of 18,720 option contracts and 3,744 observations for each strategy (22,464 observations). The study revealed that risks of long straddle and long strangle strategies have a positive impact, and options premiums negatively influence their payoff. ATM call premiums positively affect LCB payoff, while OTM and ITM call premiums positively influence SCB payoff. However, the risks of butterfly strategy did not influence its payoff. The risk of short straddle and short strangle strategies negatively influenced the payoff and were considered riskier strategies. Moreover, short straddle and short strangle strategies enhanced excess returns under both market conditions. The results would help the investors in choosing the appropriate strategy by analyzing the impact of risk on the payoff and the ability to enhance excess returns to the risk of various options strategies to incorporate in their investment.
Net Spaces in Categorical Topology a
In the paper we introduce the notion of S‐nets, S a nonempty construct, as a generalization of the usual nets. S‐net spaces and continuous maps between them are then defined in a natural way. For S‐net spaces we introduce a number of axioms and study the categories obtained. We find some topological and Cartesian closed categories of S‐net spaces and describe their relations to certain known topological categories.