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A box spread position has a constant payoff at exercise equal to the difference in strike values. Thus, the 40-50 box example above is worth 10 at exercise. For this reason, a box is sometimes considered a "pure interest rate play" because buying one basically constitutes lending some money to the counterparty until exercise.
Payoff chart from buying a butterfly spread. Profit from a long butterfly spread position. The spread is created by buying a call with a relatively low strike (x 1), buying a call with a relatively high strike (x 3), and shorting two calls with a strike in between (x 2).
In finance an iron butterfly, also known as the ironfly, is the name of an advanced, neutral-outlook, options trading strategy that involves buying and holding four different options at three different strike prices.
The condor is so named because of its payoff diagram's perceived resemblance to a large bird such as a condor. [6] An iron condor is a strategy which replicates the payoff of a short condor, but with a different combination of options. [7]
The subtraction done one way corresponds to a long-box spread; done the other way it yields a short box-spread. The pay-off for the long box-spread will be the difference between the two strike prices, and the profit will be the amount by which the discounted payoff exceeds the net premium. For parity, the profit should be zero.
The fuzzy pay-off method for real option valuation (FPOM or pay-off method) [1] is a method for valuing real options, developed by Mikael Collan, Robert Fullér, and József Mezei; and published in 2009. It is based on the use of fuzzy logic and fuzzy numbers for the creation of the possible pay-off distribution of a project (real
The technique applied then, is (1) to generate a large number of possible, but random, price paths for the underlying (or underlyings) via simulation, and (2) to then calculate the associated exercise value (i.e. "payoff") of the option for each path. (3) These payoffs are then averaged and (4) discounted to today.
For Asian options, the payoff is determined by the average underlying price over some pre-set period of time. This is different from the case of the usual European option and American option , where the payoff of the option contract depends on the price of the underlying instrument at exercise; Asian options are thus one of the basic forms of ...