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In finance, a debit spread, a.k.a. net debit spread, results when an investor simultaneously buys an option with a higher premium and sells an option with a lower premium. . The investor is said to be a net buyer and expects the premiums of the two options (the options spread) to wid
The calendar call spread (see calendar spread) is a bullish strategy and consists of selling a call option with a shorter expiration against a purchased call option with an expiration further out in time. The calendar call spread is basically a leveraged version of the covered call (see above), but purchasing long call options instead of ...
Margrabe's model of the market assumes only the existence of the two risky assets, whose prices, as usual, are assumed to follow a geometric Brownian motion.The volatilities of these Brownian motions do not need to be constant, but it is important that the volatility of S 1 /S 2, σ, is constant.
Options spreads are the basic building blocks of many options trading strategies. [6] A spread position is entered by buying and selling options of the same class on the same underlying security but with different strike prices or expiration dates. An option spread shouldn't be confused with a spread option.
The first application to option pricing was by Phelim Boyle in 1977 (for European options). In 1996, M. Broadie and P. Glasserman showed how to price Asian options by Monte Carlo. An important development was the introduction in 1996 by Carriere of Monte Carlo methods for options with early exercise features.
The option strategy where the middle options (the body) have different strike prices is known as a Condor. A Christmas tree butterfly (not to be confused with the unrelated option combination also called a Christmas tree ) consists of six options used to create a payoff diagram similar to a butterfly but slightly bearish or bullish instead of ...
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