) Identify two different option strategies the investor can follow to take advantage of increasing market...

) Identify two different option strategies the investor can follow to take advantage of increasing market volatility (regardless of the direction of the move) and explain the differences among them. Why would an investor choose one over the other?

Expert Solution

STRAP is a option strategy in which we will be trying to buy two long call and one long put and it will be helping us in order to take advantage of increased market volatility as when the market will be going up, it will be leading to increase in the volatility of the market and it will be leading to increase in the value of the call option as well as put option due to increase in the value of the volatility.

LONG STRADDLE will mean that we are buying a call option and put option of the same strike price of the similar stock of the similar maturity and we will be trying to play on the volatility because when volatility will be rising, it will mean that the value of the call option and put option will be rising and it will be helping us in order to maximize our rate of return because volatility generally have a very positive relationship with option as when the volatility will be rising the call option and put option value will be rising with the volatility because the probability of increase of achievability of their strike price increases.

There is difference between both the strategy because the long straddle will be chosen by the investor who is uncertain about the movement of the market and he is trying to you bet on either on upside or downside volatility, but strap will mean that the investor is more bullish as he has taken two call options in regard to just one put option, so he will be trying to increase his value through bullish movement and increase in the volatility on the upside.

jeff jeffy answered 1 year ago

identify two businesses that operate in the same market but have different marketing strategies. Describe the...

identify two businesses that operate in the same market but have different marketing strategies. Describe the marketing strategies and reflect on how they have impacted the success of the businesses. Provide examples to illustrate your arguments and demonstrate your understanding of the relevant concepts and principles from your learning. You should include a minimum of two (2) scholarly sources in this discussion. Information on scholarly sources is available below under useful resource links. Please answer the questions in about 500 words...

Identify the competitive advantage strategies and explain why most firms pursue only one of these strategies.

Based on your Macy's case analysis, identify and justify five strategies that Macy's can follow. Use...

Based on your Macy's case analysis, identify and justify five strategies that Macy's can follow. Use the tools in Chapter 6 to develop your answer and response (strategic management: case 1)

Consider a PUT option. If, in a two-state model, a stock can take a price of...

Consider a PUT option. If, in a two-state model, a stock can take a price of $300 or $200, what would be the hedge ratio for each of the following exercise prices: $280, $270, $240, $200? b. What do you conclude about the hedge ratio as the option strike price becomes progressively more in the money? - Increases to a maximum of 1.0 - Decreases to a minimum of 1.0 - Increases to a maximum of 0 - Decreases to...

In organizations today, employees often take advantage of their company’s information systems. Email abuse is increasing,...

In organizations today, employees often take advantage of their company’s information systems. Email abuse is increasing, and so is the amount of time employees spend surfing the Internet on company time. Indeed, statistics suggest that approximately 70% of the total amount of time spent surfing the Internet is company time. 1.Explore and Evaluate the ethics of using IT for personal uses at work. Should employees have some rights to use these resources? 2.When does their behavior become unethical? Some companies...

As an investor in the financial market, you have two situations that you can make a...

As an investor in the financial market, you have two situations that you can make a profit out of. Currently, the stock price is $30 per share. Identify the best strategy to follow for each case. (Assume 1000 shares for each case) When you expect that the price of BETA will increase in 30 days to $40. The broker’s initial margin requirement is 60% of the value of the position. - What will be your strategy and your position? -...

A company can take advantage of _, as the __of the first group of workers will...

A company can take advantage of ___, as the ____of the first group of workers will increase, but at a certain point it will decline. At this point,____ will continue to increase, but marginal product will diminish with each additional worker. Eventually there will be too many workers and not enough ___ to keep them busy, inevitably slowing down production and reducing output. consumers, marginal, product, capital resources, total output, specialization

Can management take advantage or be abusive in buying share back?

There are 6 different market entry strategies I can use to have an international business course...

There are 6 different market entry strategies I can use to have an international business course taught in Kenya. Please provide the pros and cons for each market entry strategy: 1. exporting 2) turnkey projects 3. licensing 4. franchising 5. joint ventures with a host country company 6. wholly owned subsidiary

Explain how firms can increase revenue and profit by expanding globally. Identify the different international strategies...

Explain how firms can increase revenue and profit by expanding globally. Identify the different international strategies for competing and their pros and cons. Explain the pros and cons of using strategic alliances to support international strategies. Compare and contrast the different modes that firms use to enter foreign markets. Identify the factors that influence a firm’s choice of entry mode. Recognize the pros and cons of acquisitions versus greenfield ventures as an entry strategy. Explain the promises and risks associated...

Question