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The news about the increases in interest rates left the old lady thinking about what the high frequency traders were doing. So , she was
The news about the increases in interest rates left the old lady thinking about what the high frequency traders were doing. So she was thinking, you smart people buy very quickly when the news came out, hence making gains that are almost arbitrage. Well, nothing to do about that. She decided to speak with her broker about what to do with her account. She went to her broker and began with stating that the yield curve was about to become inverted with inflexion point at about month. Given that, should she invest in options, if so which? Also, she expressed concern about the price of the options she already held, at the end, she said, maturity is getting closer and the price of my options will go down. The broker then said that some of the underlying stock is becoming more volatile, hence counteracting the time effect for these options. As for the yield curve, the broker suggested to invest in calls because the average life of the options is about months. The old lady said "you should know better" and left. What is right and what is not?
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