On March 28th 2022, the 300ETF was trading at 4.137. The information about the 2206 300ETF options
Question:
On March 28th 2022, the 300ETF was trading at 4.137. The information about the 2206 300ETF options is given in Figure 1. There are 86 natural days left. Each option contract concerns 10000 shares. Mr. Chen decided to buy a straddle.
(a) Calculate the cost of the straddle (ignore the trading fees). Interpret this cost from the point of view of someone who is selling straddle.
(b) The profifit diagram for Mr. Chen when he opened his straddle is given in Figure 2. Explain the difffference between the two curves in the profifit diagram.
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(c) Mr. Chen calculated the following Greek letters for his position. The unit is Yuan.
∆c,p = 68.4,
Γc,p = 32.8,
theta = −19.4,
vega = 156.7.
Interpret these Greek letters. Note that theta should be interpreted with respect to one natural day, while vega should be interpreted with respect to one-percentage point increase in the implied volatility.
Estimate the gain/loss of the position if the underlying moves down by 2%? Ignore the trading fees.
Essentials Of Business Statistics
ISBN: 9780078020537
5th Edition
Authors: Bruce Bowerman, Richard Connell, Emily Murphree, Burdeane Or