Question
a. Imagine I have a choice between selling a 25 delta strangle and a 35 delta strangle. Which one would I receive more premium; the
a. Imagine I have a choice between selling a 25 delta strangle and a 35 delta strangle. Which one would I receive more premium; the sold 25 delta or the sold 35 delta?
b. The 25 delta risk reversal for USDCAD (Canadian dollar per U.S. dollar) is trading at no cost.
What does this mean in terms of the market's perception of future directional movement?
c. Is it possible for the same underlying asset and maturity to have the 35 delta risk reversal trading at 1% and the 10 delta risk reversal at -2%? Why or why not?
Step by Step Solution
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a The sold 25 delta strangle would receive more premium than the sold 35 delta strangle The delta me...
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
