a. Imagine I have a choice between selling a 25 delta strangle and a 35 delta strangle.
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Question:
a. Imagine I have a choice between selling a 25 delta strangle and a 35 delta strangle. Which one would I receive more premium; the sold 25 delta or the sold 35 delta?
b. The 25 delta risk reversal for USDCAD (Canadian dollar per U.S. dollar) is trading at no cost.
What does this mean in terms of the market's perception of future directional movement?
c. Is it possible for the same underlying asset and maturity to have the 35 delta risk reversal trading at 1% and the 10 delta risk reversal at -2%? Why or why not?
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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