Your SlideShare is downloading. ×
14. option trading workbook (deb sahoo)
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Saving this for later?

Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime - even offline.

Text the download link to your phone

Standard text messaging rates apply

14. option trading workbook (deb sahoo)

204
views

Published on

Published in: Economy & Finance, Business

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
204
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Option Trading Strategy | Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT | Option Trading Workbook (Deb Sahoo)
  • 2. LOW NEUTRAL HIGH 1. Short Call Sell the Underlying 1. Long Put Sell/Write one call option Risk / Reward: Maximum Loss: Unlimited as the market rises. Maximum Gain: Limited to the premium received for selling the option. Buy one put option. Risk / Reward: Maximum Loss: Limited to the net premium paid for the option. Maximum Gain: Unlimited as the market sells off. 2. Call Bear Spread 2. Short Synthetic Sell one call option with a low strike price Buy one call option with a higher strike price Risk / Reward: Maximum Loss: Limited to the difference between the two strikes minus the net premium Maximum Gain: Limited to the net premium received for the position. I.e. the premium received for the short call minus the premium paid for the long call Short one call option at P Long one put option at P Risk / Reward Maximum Loss:Unlimited. Maximum Gain: Unlimited. 3. Put Bear Spread 3. Put Backspread Short one put option at a lower strike price Long one put option at a higher strike price Risk / Reward: Maximum Loss: Limited to the net amount paid for the spread. I.e. the premium paid for the long position less the premium received for the short position Maximum Gain: Limited to the difference between the two strike prices minus the net paid for the position Long two OTM put Short one ITM put Risk / Reward: Maximum Loss: Limited to the difference between the two strikes less the premium received for the spread. Maximum Gain: Limited on the upside to the net premium received for the spread. Unlimited on the downside. 1. Short Straddle Do Nothing 1. Long Straddle Short one call option at P Short one put option at P Risk / Reward: Maximum Loss: Unlimited as the market moves in either direction Maximum Gain: Limited to the net premium received for selling the options Buy one call option at P Buy one put option at P Risk / Reward: Maximum Loss: Limited to the total premium paid for the call and put options Maximum Gain: Unlimited as the market moves in either direction 2. Short Strangle 2. Long Strangle Short one put at lower strike price Short one call at a higher strike price Risk / Reward: Maximum Loss: Unlimited as the market moves in either direction Maximum Gain: Limited to the net premium received for selling the options Long one call option at a higher strike price Long one put option at a lower strike price Risk / Reward: Maximum Loss: Limited to the total premium paid for the call and put options Maximum Gain: Unlimited as the market moves in either direction 3. Short Gut 3. Long Gut Sell one call option at a higher strike price Sell one put option at a higher strike price Risk / Reward: Maximum Loss: Unlimited as the market moves in either direction Maximum Gain: Limited to the net premium received for selling the options Buy one call at higher strike price Buy one put at a higher strike price Risk / Reward: Maximum Loss: Limited to the total premium paid plus (call strike price minus put strike price) Maximum Gain: Unlimited as the market moves in either direction 4. Call Time Spread 4. Put Time Spread Short one future month call Long one far month call (i.e. the option you sell is to be closer to expiration than the option you are buying) Risk / Reward: Maximum Loss: Limited on both down and upside for market direction Maximum Gain: Limited Short one front month put Long one far month put (i.e. the option you sell is to be closer to expiry than the option you are buying). Risk / Reward: Maximum Loss: Limited Maximum Gain: Limited 5. Call Ratio Vertical Spread Long one ITM call Short two OTM call Risk / Reward: Maximum Loss: Unlimited on the upside and limited on the downside Maximum Gain: Limited to the difference between the two strikes less the net premium paid IMPLIED VOLATILITY Bearish Neutral Option Strategy Landscape | Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT | Option Trading Workbook (Deb Sahoo)
  • 3. 6. Put Ratio Vertical Spread Short two OTM put Long one ITM put Risk / Reward: Maximum Loss: Unlimited on the downside and limited to the net premium paid on the upside Maximum Gain: The difference between the two strike prices less the premium paid for the position 7. Long Call Butterfly 5. Short Call Butterfly Short two ATM call Long one ITM call Long one OTM call Risk / Reward: Maximum Loss: Limited to the ATM strike less the ITM strike less the net premium paid for the spread Maximum Gain: Limited to the net premium received from the spread Long two ATM call Short one ITM call Short one OTM call Risk / Reward: Maximum Loss: Limited to the net difference between the ATM strike less the ITM strike less the premium received for the position Maximum Gain: Limited to the net premium received for the option spread 8. Long Put Butterfly 6. Short Put Butterfly Sell two ATM put Buy one ITM put Buy one OTM put Risk / Reward: Maximum Loss: Limited to the ATM strike less the ITM strike less the net premium paid for the spread Maximum Gain: Limited to the net premium received from the spread Long two ATM put Short one ITM put Short one OTM put Risk / Reward: Maximum Loss: Limited to the net difference between the ATM strike less the ITM strike less the premium received for the position Maximum Gain: Limited to the net premium received for the option spread 9. Long Iron Condor 7. Short Iron Condor Long ITM Option (Long 97 Call) Short ITM Option (Short 99 Call) Short OTM Option (Short 101 Call) Long OTM Option (Long 103 Call) Risk / Reward: Max loss: Limited. The maximum loss of a long condor occurs at the wings of the option spread. It is the minimum of the difference between the lower strike call spread less the higher call spread less the total premium paid for the condor Max gain: Limited. The maximum profit of a long condor will be realized when the stock is trading between the two middle strike prices. When you look at the Condor as 2 call spreads, take the one that has the maximum distance between the strike prices, subtract the net premium paid for the spread and that is the max loss Short ITM Option (Short 97 Call) Long ITM Option (Long 99 Call) Long OTM Option (Long 101 Call) Short OTM Option (Short 103 Call) Risk / Reward: Max loss: Limited. The maximum loss of a short condor occurs at the center of the option spread. If you’ve broken the Condor down as 2 call (put) spreads, take the one that has the maximum distance between the strike prices, add the net premium received for the spread and that is the max loss Max gain: Limited. The maximum profit of a short condor occurs on the wings, when the underlying asset is trading past the upper or lower strike prices 1. Naked Put Buy the Underlying 1. Long Naked Call Sell one put option Risk / Reward: Maximum Loss: Unlimited in a falling market. Maximum Gain: Limited to the premium received for selling the put option. Purchase of one call option Risk / Reward: Maximum Loss: Limited to the premium paid up front for the option Maximum Gain: Unlimited as the market rallies 2. Call Bull Spread 2. Long Synthetic Buy one call with a low strike price Sell one call with a higher strike price Risk / Reward: Maximum Loss: Limited to premium paid for the long option minus the premium received for the short option Maximum Gain: Limited to the difference between the two strike prices minus the net premium paid for the spread Buy one call option at P Sell one put option at P Risk / Reward: Maximum Loss:Unlimited. Maximum Gain: Unlimited. 3. Put Bull Spread 3. Call Ratio Spread Buy one put option with a strike price Sell one put option with a higher strike price than the put you bought Risk / Reward: Maximum Loss: Limited to the difference between the two strike prices minus the net premium received for the position. Maximum Gain: Limited to the net credit received for the spread. I.e. the premium receieved for the short option less the premium paid for the long option. Sell one ITM call option Buy two OTM call options at P Risk / Reward: Maximum Loss: Limited to the difference between the two strikes plus the net premium (which should be a credit). Maximum Gain: Unlimited on the upside and limited on the downside. 4. Covered Call 4. Call Backspread Long underlying asset Short call options. Risk / Reward: Maximum Loss: Unlimited on the downside. Maximum Gain: Limited to the premium received from the sold call option. Short one ITM call Long two OTM call Risk / Reward: Maximum Loss: Limited to the difference between the two strikes plus the net premium (which should be a credit) Maximum Gain: Unlimited on the upside and limited on the downside M A R K E T D I R E C T I O N Bullish Option Trading Workbook (Deb Sahoo)
  • 4. 5. Protective Put Long the underlying asset Long put option Risk / Reward: Maximum Loss: Limited to the premium paid for the put option. Maximum Gain: Unlimited as the market rallies. 6. Collar Long underlying stock Short OTM call option Long OTM put option Risk / Reward: Maximum Loss: Any loss taken on the stock +/- the premium for the options. The loss on the stock will be the purchase price of the stock minus the strike price of the put option (as you will exercise at that price) plus the net premium paid or received. Maximum Gain: The profit of the stock +/- the premium for the optoins. The profit on the stock will be the strike price of the call option minus the purchase price of the stock (as you will be exercised and deliver at the strike) plus the net premium paid or received. Option Trading Workbook (Deb Sahoo)
  • 5. This worksheet is a simple option pricer. You simply enter the option details into the blue cells and the output values will be displayed underneath in the grey cells. Company Ticker NTAP NetApp Inc. Outlook of the Stock Bullish Bullish or Bearish ? Name of Option Strategy Employing Input Value Current Underlying Price $34.90 The current base price of the instrument, eg, the closing price of Xilinx stock Exercise Price $40.00 The price at which the underlying instrument will be exchanged. Also called Strike Price Strategy Implementation Date 5/3/2013 Expiry Date 1/18/2014 The Date which the contract expires Annual Historical Volatility 40.00% The Historical Volatility of the asset's returns Annual Risk Free Rate 2.00% The current risk free interest rate i.e. your return on cash held in the bank Dividened Yield 0.00% The Annualized Dividend Growth Rate of the Stock DTE (Years) 0.71 Parameter Call Option Put Option What It Means For Your Strategy ?s Theoretical Price $3.03 $7.57 Delta 0.4235 -0.5765 Measures the exposure of option price to movement of underlying stock price Gamma 0.0332 0.0332 Measures the exposure of the option delta to the movement of the underlying stock price Theta -0.0095 -0.0074 Measures the exposure of the option price to the passage of time Vega 0.1153 0.1153 Measures the exposure of the option price to changes in volatility of the underlying Rho 0.0837 -0.1972 Measures the exposure of the option price to changes in risk free interest rates (Rarely Used) Comments Inputs for Creating an Option Strategy | Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT | Option Trading Workbook (Deb Sahoo)
  • 6. Input Value Current Stock Price $34.90 Annual Standard Deviation 40.00% Annual Risk-Free Rate 2.00% Annual Dividend Yield 0.00% Exercise Price $40.00 Days to Expiration 260 d1 -0.193 d2 -0.531 N(d1) 0.4235 N(d2) 0.2978 Intrinsic Call Value $0.00 Black-Scholes Call Price $3.03 Put Price (Put/Call Parity) $7.57 Put Option Delta -0.5765 Black Sholes Valuation of Option | Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT | Option Trading Workbook (Deb Sahoo)
  • 7. This worksheet allows you to price a string of calls and puts for the same expiration and compare implied market volatility to the theoretical volatility of the underlying Company Name NetApp Inc. $34.90 Underlying Price 5/3/2013 Strategy Implementation Date 40% Annual Historical Volatility 1/18/2014 Expiry Date 2.00% Annual Risk Free Rate 0.00% Dividend Yield 260 DTE 0.71 DTE in Years Theoretical Market Theoretical Market Strike Prices Price Price Implied Volatility Delta Gamma Vega Theta Rho Strike Prices Price Price Implied Volatility Delta Gamma Vega Theta Rho 20.00 ITM 15.35$ $14.91 0.00% 0.97 0.0060 0.0208 -0.0026 0.1315 20.00 OTM 0.16$ $0.48 51.06% -0.03 0.0060 0.0208 -0.0015 -0.0090 23.00 ITM 12.67$ $9.95 0.00% 0.93 0.0119 0.0413 -0.0043 0.1399 23.00 OTM 0.45$ $0.58 43.00% -0.07 0.0119 0.0413 -0.0030 -0.0216 25.00 ITM 11.02$ $10.59 31.25% 0.88 0.0165 0.0573 -0.0055 0.1414 25.00 OTM 0.77$ $0.72 39.10% -0.12 0.0165 0.0573 -0.0041 -0.0341 30.00 ITM 7.49$ $7.30 38.01% 0.75 0.0272 0.0946 -0.0083 0.1319 30.00 OTM 2.16$ $1.95 37.74% -0.25 0.0272 0.0946 -0.0067 -0.0788 33.00 ITM 5.80$ $4.50 28.06% 0.65 0.0315 0.1095 -0.0093 0.1195 33.00 OTM 3.43$ $2.80 34.21% -0.35 0.0315 0.1095 -0.0076 -0.1122 34.00 ITM 5.31$ $4.00 28.40% 0.61 0.0325 0.1127 -0.0096 0.1147 34.00 OTM 3.93$ $3.70 37.98% -0.39 0.0325 0.1127 -0.0077 -0.1241 35.00 OTM 4.85$ $3.15 25.28% 0.58 0.0332 0.1151 -0.0097 0.1097 35.00 ITM 4.46$ $3.80 34.31% -0.42 0.0332 0.1151 -0.0078 -0.1361 38.00 OTM 3.67$ $2.22 27.54% 0.48 0.0338 0.1174 -0.0098 0.0941 38.00 ITM 6.24$ $5.50 33.72% -0.52 0.0338 0.1174 -0.0077 -0.1728 40.00 OTM 3.03$ $1.64 27.61% 0.42 0.0332 0.1153 -0.0095 0.0837 40.00 ITM 7.57$ $6.80 33.27% -0.58 0.0332 0.1153 -0.0074 -0.1972 42.00 OTM 2.50$ $1.12 26.87% 0.37 0.0320 0.1110 -0.0091 0.0737 42.00 ITM 9.00$ $8.50 35.42% -0.63 0.0320 0.1110 -0.0068 -0.2213 45.00 OTM 1.85$ $0.82 28.89% 0.29 0.0292 0.1015 -0.0083 0.0599 45.00 ITM 11.31$ $10.60 32.59% -0.71 0.0292 0.1015 -0.0058 -0.2561 47.00 OTM 1.51$ $0.57 28.58% 0.25 0.0270 0.0938 -0.0076 0.0517 47.00 ITM 12.94$ $13.61 46.76% -0.75 0.0270 0.0938 -0.0051 -0.2784 50.00 OTM 1.11$ $0.15 23.96% 0.20 0.0235 0.0816 -0.0066 0.0410 50.00 ITM 15.50$ $17.91 64.40% -0.80 0.0235 0.0816 -0.0039 -0.3101 55.00 OTM 0.65$ $0.36 34.56% 0.13 0.0178 0.0616 -0.0049 0.0271 55.00 ITM 19.98$ $23.95 82.00% -0.87 0.0178 0.0616 -0.0020 -0.3591 60.00 OTM 0.38$ $0.06 28.92% 0.08 0.0128 0.0445 -0.0036 0.0176 60.00 ITM 24.64$ $28.80 87.93% -0.92 0.0128 0.0445 -0.0003 -0.4038 60.00 OTM 0.38$ $0.06 28.92% 0.08 0.0128 0.0445 -0.0036 0.0176 60.00 ITM 24.64$ $28.80 87.93% -0.92 0.0128 0.0445 -0.0003 -0.4038 60.00 OTM 0.38$ $0.06 28.92% 0.08 0.0128 0.0445 -0.0036 0.0176 60.00 ITM 24.64$ $28.80 87.93% -0.92 0.0128 0.0445 -0.0003 -0.4038 60.00 OTM 0.38$ $0.06 28.92% 0.08 0.0128 0.0445 -0.0036 0.0176 60.00 ITM 24.64$ $28.80 87.93% -0.92 0.0128 0.0445 -0.0003 -0.4038 60.00 OTM 0.38$ $0.06 28.92% 0.08 0.0128 0.0445 -0.0036 0.0176 60.00 ITM 24.64$ $28.80 87.93% -0.92 0.0128 0.0445 -0.0003 -0.4038 60.00 OTM 0.38$ $0.06 28.92% 0.08 0.0128 0.0445 -0.0036 0.0176 60.00 ITM 24.64$ $28.80 87.93% -0.92 0.0128 0.0445 -0.0003 -0.4038 Theoretical Volatility vs. Market View of Voliatility of Available Options in the Market | Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT | Option Greeks Implied Volatility From Available Put Options in the Market Option Greeks Implied Volatility From Available Call Options in the Market -10.00% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00% 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 ImpliedVolatility Strike Prices Implied Volatility Implied Volatility From Available Call Options in the Market Implied Volatility From Available Put Options in the Market Option Trading Workbook (Deb Sahoo)
  • 8. This worksheet lets you implement combinations of options positions and provides you the P&L plot of your strategy. The data for the options is taken from the Input tab. Enter the number of contracts for each position with positive for Long positions and negative for short positions. Enter C for calls, P for puts, S for stock. If you know what the option premium in the market, you can enter in the "Actual Market Premium" section. Company Name NetApp Inc. Input Value Current Underlying Price $34.90 The current base price of the instrument, eg, the closing price of Xilinx stock Exercise Price $40.00 The price at which the underlying instrument will be exchanged. Also called Strike Price Strategy Implementation Date 5/3/2013 Expiry Date 1/18/2014 The Date which the contract expires Annual Historical Volatility 40.00% The Historical Volatility of the asset's returns Annual Risk Free Rate 2.00% The current risk free interest rate i.e. your return on cash held in the bank Dividened Yield 0.00% The Annualized Dividend Growth Rate of the Stock Position 1 Position 2 Position 3 Position 4 Position 5 Position 6 Position 7 Position 8 Position 9 Position 10 Strategy Total No of Contracts 0 -1 1 1 -1 Contract Type S C C C C Enter S/C/P Strike Price $34.90 $25.00 $30.00 $40.00 $45.00 Calculated Theoretical Premium $4.40 $11.02 $7.49 $3.03 $1.85 $0.00 $0.00 $0.00 $0.00 $0.00 Actual Market Premium $0.00 $10.59 $7.30 $1.64 $0.82 Premium To Be Used $0.00 $10.59 $7.30 $1.64 $0.82 $0.00 $0.00 $0.00 $0.00 $0.00 $2.47 Red - Debit, Black - Credit Delta 0.00 -0.88 0.75 0.42 -0.29 0.00 0.00 0.00 0.00 0.00 -0.01 Gamma 0.00 -0.02 0.03 0.03 -0.03 0.00 0.00 0.00 0.00 0.00 0.01 Theta 0.00 0.01 -0.01 -0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 Vega 0.00 -0.06 0.09 0.12 -0.10 0.00 0.00 0.00 0.00 0.00 0.05 Rho 0.00 -0.14 0.13 0.08 -0.06 0.00 0.00 0.00 0.00 0.00 0.01 Graph Increment 5.00 Comments Option Strategy Implementation | Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT | -3.00 -2.00 -1.00 0.00 1.00 2.00 3.00 2 5 10 15 20 25 30 35 40 45 50 55 60 65 70 Total Profit / Loss of Option Strategy at Expiration Total P&L Total Theoretical P&L Option Trading Workbook (Deb Sahoo)
  • 9. Underlying Price Strat1 Strat2 Strat3 Strat4 Strat5 Strat6 Strat7 Strat8 Strat9 Strat10 Total P&L Intercept 2 0.00 10.59 -7.30 -1.64 0.82 0.00 0.00 0.00 0.00 0.00 2.47 0.00 5 0.00 10.59 -7.30 -1.64 0.82 0.00 0.00 0.00 0.00 0.00 2.47 0.00 10 0.00 10.59 -7.30 -1.64 0.82 0.00 0.00 0.00 0.00 0.00 2.47 0.00 15 0.00 10.59 -7.30 -1.64 0.82 0.00 0.00 0.00 0.00 0.00 2.47 0.00 20 0.00 10.59 -7.30 -1.64 0.82 0.00 0.00 0.00 0.00 0.00 2.47 0.00 25 0.00 10.59 -7.30 -1.64 0.82 0.00 0.00 0.00 0.00 0.00 2.47 27.42 30 0.00 5.69 -7.30 -1.64 0.82 0.00 0.00 0.00 0.00 0.00 -2.43 0.00 35 0.00 0.69 -2.40 -1.64 0.82 0.00 0.00 0.00 0.00 0.00 -2.53 0.00 40 0.00 -4.31 2.60 -1.64 0.82 0.00 0.00 0.00 0.00 0.00 -2.53 42.48 45 0.00 -9.31 7.60 3.26 0.82 0.00 0.00 0.00 0.00 0.00 2.37 0.00 50 0.00 -14.31 12.60 8.26 -4.08 0.00 0.00 0.00 0.00 0.00 2.47 0.00 55 0.00 -19.31 17.60 13.26 -9.08 0.00 0.00 0.00 0.00 0.00 2.47 0.00 60 0.00 -24.31 22.60 18.26 -14.08 0.00 0.00 0.00 0.00 0.00 2.47 0.00 65 0.00 -29.31 27.60 23.26 -19.08 0.00 0.00 0.00 0.00 0.00 2.47 0.00 70 0.00 -34.31 32.60 28.26 -24.08 0.00 0.00 0.00 0.00 0.00 2.47 #DIV/0! Underlying Price Strat1 Strat2 Strat3 Strat4 Strat5 Strat6 Strat7 Strat8 Strat9 Strat10 Total Theoretical P&L 2 0.00 10.59 -7.30 -1.64 0.82 0.00 0.00 0.00 0.00 0.00 2.47 5 0.00 10.59 -7.30 -1.64 0.82 0.00 0.00 0.00 0.00 0.00 2.47 10 0.00 10.58 -7.30 -1.64 0.82 0.00 0.00 0.00 0.00 0.00 2.47 15 0.00 10.40 -7.25 -1.64 0.82 0.00 0.00 0.00 0.00 0.00 2.34 20 0.00 9.41 -6.82 -1.57 0.79 0.00 0.00 0.00 0.00 0.00 1.81 25 0.00 7.14 -5.53 -1.22 0.62 0.00 0.00 0.00 0.00 0.00 1.01 30 0.00 3.73 -3.15 -0.31 0.09 0.00 0.00 0.00 0.00 0.00 0.37 35 0.00 -0.43 0.19 1.39 -1.03 0.00 0.00 0.00 0.00 0.00 0.12 40 0.00 -5.03 4.21 3.91 -2.87 0.00 0.00 0.00 0.00 0.00 0.23 45 0.00 -9.83 8.66 7.15 -5.43 0.00 0.00 0.00 0.00 0.00 0.54 50 0.00 -14.74 13.36 10.96 -8.64 0.00 0.00 0.00 0.00 0.00 0.94 55 0.00 -19.70 18.20 15.17 -12.37 0.00 0.00 0.00 0.00 0.00 1.31 60 0.00 -24.68 23.12 19.67 -16.48 0.00 0.00 0.00 0.00 0.00 1.62 65 0.00 -29.67 28.07 24.35 -20.88 0.00 0.00 0.00 0.00 0.00 1.87 70 0.00 -34.67 33.05 29.15 -25.48 0.00 0.00 0.00 0.00 0.00 2.05 Underlying Price Strat1 Strat2 Strat3 Strat4 Strat5 Strat6 Strat7 Strat8 Strat9 Strat10 Total Delta 2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10 0.00 -0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 15 0.00 -0.09 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.06 20 0.00 -0.32 0.16 0.03 -0.01 0.00 0.00 0.00 0.00 0.00 -0.15 25 0.00 -0.58 0.37 0.12 -0.06 0.00 0.00 0.00 0.00 0.00 -0.16 30 0.00 -0.77 0.58 0.26 -0.16 0.00 0.00 0.00 0.00 0.00 -0.09 35 0.00 -0.88 0.75 0.42 -0.29 0.00 0.00 0.00 0.00 0.00 -0.01 40 0.00 -0.94 0.85 0.58 -0.44 0.00 0.00 0.00 0.00 0.00 0.05 45 0.00 -0.97 0.92 0.71 -0.58 0.00 0.00 0.00 0.00 0.00 0.07 50 0.00 -0.99 0.96 0.81 -0.70 0.00 0.00 0.00 0.00 0.00 0.08 55 0.00 -0.99 0.98 0.87 -0.79 0.00 0.00 0.00 0.00 0.00 0.07 P&L Payoff of Each Strategy Relative to Changes in Underlying Price Theoretical P&L of Each Strategy Relative to Changes in Underlying Price Position Delta of Each Strategy Relative to Underlying Price Changes Option Trading Workbook (Deb Sahoo)
  • 10. 60 0.00 -1.00 0.99 0.92 -0.86 0.00 0.00 0.00 0.00 0.00 0.06 65 0.00 -1.00 0.99 0.95 -0.90 0.00 0.00 0.00 0.00 0.00 0.04 70 0.00 -1.00 1.00 0.97 -0.94 0.00 0.00 0.00 0.00 0.00 0.03 Underlying Price Strat1 Strat2 Strat3 Strat4 Strat5 Strat6 Strat7 Strat8 Strat9 Strat10 Total Gamma 2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 15 0.00 -0.03 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.02 20 0.00 -0.05 0.04 0.01 -0.01 0.00 0.00 0.00 0.00 0.00 -0.01 25 0.00 -0.05 0.04 0.02 -0.01 0.00 0.00 0.00 0.00 0.00 0.01 30 0.00 -0.03 0.04 0.03 -0.02 0.00 0.00 0.00 0.00 0.00 0.02 35 0.00 -0.02 0.03 0.03 -0.03 0.00 0.00 0.00 0.00 0.00 0.01 40 0.00 -0.01 0.02 0.03 -0.03 0.00 0.00 0.00 0.00 0.00 0.01 45 0.00 0.00 0.01 0.02 -0.03 0.00 0.00 0.00 0.00 0.00 0.00 50 0.00 0.00 0.01 0.02 -0.02 0.00 0.00 0.00 0.00 0.00 0.00 55 0.00 0.00 0.00 0.01 -0.02 0.00 0.00 0.00 0.00 0.00 0.00 60 0.00 0.00 0.00 0.01 -0.01 0.00 0.00 0.00 0.00 0.00 0.00 65 0.00 0.00 0.00 0.00 -0.01 0.00 0.00 0.00 0.00 0.00 0.00 70 0.00 0.00 0.00 0.00 -0.01 0.00 0.00 0.00 0.00 0.00 0.00 Underlying Price Strat1 Strat2 Strat3 Strat4 Strat5 Strat6 Strat7 Strat8 Strat9 Strat10 Total Theta 2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 15 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 25 0.00 0.01 -0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 30 0.00 0.01 -0.01 -0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 35 0.00 0.01 -0.01 -0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 40 0.00 0.00 -0.01 -0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 45 0.00 0.00 -0.01 -0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 50 0.00 0.00 0.00 -0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 55 0.00 0.00 0.00 -0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 60 0.00 0.00 0.00 -0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 65 0.00 0.00 0.00 -0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 70 0.00 0.00 0.00 -0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 Underlying Price Strat1 Strat2 Strat3 Strat4 Strat5 Strat6 Strat7 Strat8 Strat9 Strat10 Total Vega 2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 15 0.00 -0.02 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.01 20 0.00 -0.06 0.04 0.01 -0.01 0.00 0.00 0.00 0.00 0.00 -0.01 25 0.00 -0.08 0.08 0.04 -0.03 0.00 0.00 0.00 0.00 0.00 0.01 30 0.00 -0.08 0.10 0.08 -0.06 0.00 0.00 0.00 0.00 0.00 0.04 35 0.00 -0.06 0.09 0.12 -0.10 0.00 0.00 0.00 0.00 0.00 0.05 40 0.00 -0.04 0.08 0.13 -0.13 0.00 0.00 0.00 0.00 0.00 0.04 45 0.00 -0.02 0.06 0.13 -0.15 0.00 0.00 0.00 0.00 0.00 0.02 Position Gamma of Each Strategy Relative to Underlying Price Changes Position Theta of Each Strategy Relative to Underlying Price Changes Position Vega of Each Strategy Relative to Underlying Price Changes Option Trading Workbook (Deb Sahoo)
  • 11. 50 0.00 -0.01 0.04 0.12 -0.15 0.00 0.00 0.00 0.00 0.00 -0.01 55 0.00 -0.01 0.02 0.10 -0.13 0.00 0.00 0.00 0.00 0.00 -0.02 60 0.00 0.00 0.02 0.07 -0.12 0.00 0.00 0.00 0.00 0.00 -0.03 65 0.00 0.00 0.01 0.06 -0.09 0.00 0.00 0.00 0.00 0.00 -0.03 70 0.00 0.00 0.01 0.04 -0.07 0.00 0.00 0.00 0.00 0.00 -0.03 Underlying Price Strat1 Strat2 Strat3 Strat4 Strat5 Strat6 Strat7 Strat8 Strat9 Strat10 Total Rho 2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 15 0.00 -0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.01 20 0.00 -0.04 0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -0.02 25 0.00 -0.08 0.05 0.02 -0.01 0.00 0.00 0.00 0.00 0.00 -0.02 30 0.00 -0.12 0.09 0.05 -0.03 0.00 0.00 0.00 0.00 0.00 0.00 35 0.00 -0.14 0.13 0.08 -0.06 0.00 0.00 0.00 0.00 0.00 0.01 40 0.00 -0.16 0.16 0.13 -0.10 0.00 0.00 0.00 0.00 0.00 0.03 45 0.00 -0.17 0.18 0.16 -0.14 0.00 0.00 0.00 0.00 0.00 0.04 50 0.00 -0.17 0.19 0.20 -0.18 0.00 0.00 0.00 0.00 0.00 0.04 55 0.00 -0.17 0.20 0.22 -0.21 0.00 0.00 0.00 0.00 0.00 0.04 60 0.00 -0.17 0.20 0.24 -0.24 0.00 0.00 0.00 0.00 0.00 0.03 65 0.00 -0.17 0.21 0.25 -0.26 0.00 0.00 0.00 0.00 0.00 0.02 70 0.00 -0.18 0.21 0.26 -0.28 0.00 0.00 0.00 0.00 0.00 0.02 Position Rho of Each Strategy Relative to Underlying Price Changes Option Trading Workbook (Deb Sahoo)
  • 12. Strategy Names Strategy Setup Company Name NetApp Inc. Strategy Implementation Date 5/3/2013 Option Exp Date1/18/2014 Current Stock Price $34.90 Historical Volatility 40.00% Long Syntetic Current Stock Price $34.90 NetApp Inc. Long 40 Call Short 40 Put Call Backspread Current Stock Price $34.90 NetApp Inc. Short 34 Call Long 38 Call Long 38 Call P&L Plots of Various Strategies Relative to Changes in Underlying Price | Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT | P&L PLOTS Option Trading Workbook (Deb Sahoo)
  • 13. Call Bull Spread Current Stock Price $34.90 NetApp Inc. Long 33 Call Short 38 Call Put Bull Spread Current Stock Price $34.90 NetApp Inc. Long 38 Put Short 42 Put Option Trading Workbook (Deb Sahoo)
  • 14. Put Bull Spread Current Stock Price $34.90 NetApp Inc. Long Stock Short 38 Call Long 33 Put Put Backspread Current Stock Price $34.90 NetApp Inc. Short 38 Put Long 30 Put Long 30 Put Option Trading Workbook (Deb Sahoo)
  • 15. Call Bearspread Current Stock Price $34.90 NetApp Inc. Short 33 Call Long 38 Call Put Bearspread Current Stock Price $34.90 NetApp Inc. Short 33 Put Long 38 Put Option Trading Workbook (Deb Sahoo)
  • 16. Long Straddle Current Stock Price $34.90 NetApp Inc. Long 33 Call Long 33 Put Long Straddle Current Stock Price $34.90 NetApp Inc. Short 35 Call Short 35 Put Option Trading Workbook (Deb Sahoo)
  • 17. Long Strangle Current Stock Price $34.90 NetApp Inc. Long 38 Call Long 30 Put Short Strangle Current Stock Price $34.90 NetApp Inc. Short 40 Call Short 30 Put Option Trading Workbook (Deb Sahoo)
  • 18. Call Ratio Vertcal Ratio Spread Current Stock Price $34.90 NetApp Inc. Long 34 Call Short 45 Call Short 45 Call Put Ratio Vertcal Ratio Spread Current Stock Price $34.90 NetApp Inc. Long 40 Put Short 25 Put Short 25 Put Option Trading Workbook (Deb Sahoo)
  • 19. Long Call Butterfly Current Stock Price $34.90 NetApp Inc. Short 35 Call Short 35 Call Long 30 Call Long 40 Call Short Call Butterfly Current Stock Price $34.90 NetApp Inc. Long 35 Call Long 35 Call Short 30 Call Short 40 Call Option Trading Workbook (Deb Sahoo)
  • 20. Long Put Butterfly Current Stock Price $34.90 NetApp Inc. Short 35 Put Short 35 Put Long 30 Put Long 40 Put Short Put Butterfly Current Stock Price $34.90 NetApp Inc. Long 35 Put Long 35 Put Short 30 Put Short 40 Put Option Trading Workbook (Deb Sahoo)
  • 21. Long Iron Condor Current Stock Price $34.90 NetApp Inc. Long 25 Call Short 30 Call Short 40 Call Long 45 Call Short Iron Condor Current Stock Price $34.90 NetApp Inc. Short 25 Call Longt 30 Call Long 40 Call Short 45 Call Option Trading Workbook (Deb Sahoo)
  • 22. This worksheet show the changes in your option strategy Greeks relative to the change in the price of the underlying. Company Name NetApp Inc. Strategy Implementation Date 5/3/2013 Option Exp Date 1/18/2014 Current Stock Price $34.90 Historical Volatility 40.00% Plots of Strategy Greeks Relative to Underlying Price Changes | Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT | -3.00 -2.00 -1.00 0.00 1.00 2.00 3.00 2 5 10 15 20 25 30 35 40 45 50 55 60 65 70 P&L at Expiration -0.20 -0.15 -0.10 -0.05 0.00 0.05 0.10 2 5 10 15 20 25 30 35 40 45 50 55 60 65 70 Delta -0.02 -0.02 -0.01 -0.01 0.00 0.01 0.01 0.02 0.02 2 5 10 15 20 25 30 35 40 45 50 55 60 65 70 Gamma -0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2 5 10 15 20 25 30 35 40 45 50 55 60 65 70 Theta -0.04 -0.02 0.00 0.02 0.04 0.06 2 5 10 15 20 25 30 35 40 45 50 55 60 65 70 Vega -0.03 -0.02 -0.01 0.00 0.01 0.02 0.03 0.04 0.05 2 5 10 15 20 25 30 35 40 45 50 55 60 65 70 Rho Option Trading Workbook (Deb Sahoo)
  • 23. Company Name NetApp Inc. 34.90$ Underlying Price 40.00$ Exercise Price 5/5/2013 Today's Date 40.00% Historical Volatility 1/18/2014 Expiry Date 2% Risk Free Rate 0% Dividend Yield 258 DTE 0.71 DTE in Years Strike Price 10 15 20 25 30 35 40 45 50 55 60 40 0.000051 0.001937 0.010456 0.023209 0.032011 0.033348 0.029126 0.022664 0.016314 0.011132 0.007320 45 0.000012 0.000701 0.005116 0.014341 0.023934 0.029290 0.029410 0.025879 0.020793 0.015672 0.011284 50 0.000003 0.000255 0.002433 0.008403 0.016630 0.023505 0.026737 0.026262 0.023282 0.019181 0.014979 Underlying Price Gamma vs. Underlying Price For Various Strike Price | Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT | -0.005000 0.000000 0.005000 0.010000 0.015000 0.020000 0.025000 0.030000 0.035000 0.040000 10 15 20 25 30 35 40 45 50 55 60 Gamma vs. Underlying Price For Various Strike Price 40 45 50 Option Trading Workbook (Deb Sahoo)
  • 24. Company NameNetApp Inc. 34.90$ Underlying Price 40.00$ Exercise Price 5/5/2013 Today's Date 40.00% Historical Volatility 1/18/2014 Expiry Date 2% Risk Free Rate 0% Dividend Yield 258 DTE 0.71 DTE in Years Strike Price 10 15 20 25 30 35 40 45 50 55 60 40 0.00001 0.00122 0.01171 0.04069 0.08092 0.11484 0.13111 0.12919 0.11486 0.09487 0.07426 45 0.00000 0.00044 0.00573 0.02514 0.06050 0.10087 0.13238 0.14751 0.14639 0.13355 0.11447 50 0.00000 0.00016 0.00272 0.01473 0.04204 0.08095 0.12035 0.14969 0.16391 0.16345 0.15195 Vega vs Underlying Price For Various Strike Price | Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT | Underlying Price (0.05000) 0.00000 0.05000 0.10000 0.15000 0.20000 10 15 20 25 30 35 40 45 50 55 60 Vega vs Underlying Price For Various Strike Price 40 45 50 Option Trading Workbook (Deb Sahoo)
  • 25. Company Name NetApp Inc. 34.90$ Underlying Price 40.00$ Exercise Price 5/5/2013 Today's Date 40.00% Historical Volatility 1/18/2014 Expiry Date 2% Risk Free Rate 0% Dividend Yield 258 DTE 0.71 DTE in Years Strike Price 100 90 80 70 60 50 40 30 20 10 1 Call Theta 40 (0.0132) (0.0136) (0.0140) (0.0144) (0.0147) (0.0150) (0.0150) (0.0145) (0.0124) (0.0060) (0.0000) Call Option Price 40 1.26 1.12 0.99 0.85 0.70 0.55 0.40 0.25 0.12 0.02 0.00 Put Theta 40 (0.0111) (0.0114) (0.0118) (0.0122) (0.0125) (0.0128) (0.0128) (0.0123) (0.0102) (0.0039) 0.0022 Put Option Price 40 6.14 6.03 5.91 5.79 5.67 5.54 5.41 5.29 5.17 5.10 5.10 Days To Expiry / Passage of Time Decay of Call and Put Option Price Relative To Passage of Time | Deb Sahoo | MBA, Finance, University of Michigan | MS, EE, University of Southern California | B-Tech, EE, IIT | (0.0160) (0.0140) (0.0120) (0.0100) (0.0080) (0.0060) (0.0040) (0.0020) 0.0000 100 90 80 70 60 50 40 30 20 10 1 Call Theta 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 100 90 80 70 60 50 40 30 20 10 1 Decay of Call Option Price (0.0150) (0.0100) (0.0050) 0.0000 0.0050 100 90 80 70 60 50 40 30 20 10 1 Put Theta 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 100 90 80 70 60 50 40 30 20 10 1 Decay of Put Option Price Option Trading Workbook (Deb Sahoo)