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Python for Finance by Yuxing Yan

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Various trading strategies

In the following table, we will summarize several commonly used trading strategies involving various types of options:

Names

Description

Direction of initial cash flow

Expectation of future price movement

Bull spread with calls

Buy a call (x1) sell a call (x2) [x1 < x2]

Outflow

Rise

Bull spread with puts

Buy a put (x1), sell a put (x2) [x1 < x2]

Inflow

Rise

Bear spread with puts

Buy a put (x2), sell a put (x1) [x1 < x2]

Outflow

Fall

Bear spread with calls

Buy a call (x2), sell a call (x1) [x1 < x2]

Inflow

Fall

Straddle

Buy a call and sell a put with the same x value

Outflow

Rise or fall

Strip

Buy two puts and a call (with the same x value)

Outflow

prob (fall) > prob (rise)

Strap

Buy two ...

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