Question
Imagine you believe that the current political situation in the U.S. is just the calm before the storm, and that the election there is still
Imagine you believe that the current political situation in the U.S. is just the calm before the storm, and that the election there is still going to take many twists and turns before it is finally resolved. Describe an options strategy that you can implement to take advantage of this.
a) List the securities (options and/or stocks) you would use and whether you would be long or short each security. For options, be sure to specify the underlying, strike price, expiration, etc.
b )Draw a profit and loss diagram for each security you are using, and also for the entire portfolio.
c) List at least two situations/developments in which your strategy fails and you lose money.
d) Imagine your original view has changed and you now believe everything is actually resolved and there will be no major issues going forward. Assume you are not allowed to sell any of the positions you took in (a) above, what new trades would you put in place to hedge your original position, and maybe even take advantage of your new belief?
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