Bear spread: Difference between revisions
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A bear spread can be constructed using put options by buying a put with a given strike price, and selling an otherwise identical put with a lower strike price. It can also be constructed using appropriate call options. | A bear spread can be constructed using put options by buying a put with a given strike price, and selling an otherwise identical put with a lower strike price. It can also be constructed using appropriate call options. | ||
2. ''Hedging with options''. | 2. ''Hedging with options''. | ||
A composite transaction in two options plus an underlying asset or other exposure, resulting in the same profit/(loss) profile as the deal described in 1. above. | A composite transaction in two options plus an underlying asset or other exposure, resulting in the same profit/(loss) profile as the deal described in 1. above. | ||
== See also == | == See also == | ||
Revision as of 11:47, 6 May 2016
1. Options speculation.
A composite speculative deal in two options, which results in a profit/loss profile similar to a conventional put option, except that the upside potential is capped in return for a reduction in the net premium payable.
A bear spread can be constructed using put options by buying a put with a given strike price, and selling an otherwise identical put with a lower strike price. It can also be constructed using appropriate call options.
2. Hedging with options.
A composite transaction in two options plus an underlying asset or other exposure, resulting in the same profit/(loss) profile as the deal described in 1. above.
