PDF & Video: Chapter 4 — Expiration Profit and Loss
Ch 4 - Expiration Profit and Loss
About this lesson
Slides attached-
Construct Expiration PNL Graphs for the following (hedged) options or strategies.
For each graph, define all slopes and breakevens.
*All options are assumed to be hedged at entry on their given deltas. "Long 1" = +1x, "Short 1" = -1x, and "-5 Delta" = -0.05d before multiplier (hedge slope of -0.05 in graph)
- Long 1x 4590 Put for $16.60; -5 Delta, hedged vs 5733 SPX
- Short 1x 5450 Put @ $73.40; -23 Delta, hedged vs 5733 SPX
- Short 1x 5350 - 5550 Put Spread @ $45.00; -23 Delta, hedged vs 5596
- Selling a put spread implies you are short the higher strike, long the lower strike, and have collected premium to open the trade
- Short 1x (Put Spread) 4590-5450--6020 Put Spread Collar @ $0.00; -46 Delta, hedged vs 5733
- In this structure you are short the Put Spread & long the Call, zero-cost
*Remember- the Delta values given are option deltas.
You must account for your trade direction properly.
If you Buy Call- you must hedge by selling the underlying... if you Sell Call- you must hedge by buying the underlying.
If you Buy Put- you must hedge by buying the underlying... if you Sell Put- you must hedge by selling the underlying.