JP
DOKE, Inc. - Exporters Extraordinaire
Alternate
Strategy #2
Deutsche
Mark stable, High Volatility
Hedging
Strategy: +400F +700P(itm) (Similar to Synthetic Long Straddle)
|
L or S (Long/Short)
|
L
|
L
|
. |
| F, C, or P |
F
|
P
|
. |
| Forward/Strike Price |
.5548
|
.5500
|
. |
| Option Price |
0
|
.0091
|
. |
| Number of Contracts |
400
|
700
|
Net
|
| Total Premium |
N/A
|
796
|
-796
|
In
order to capitalize on the high volatility of this scenario, we created
what approximates a synthetic long straddle to profit of price movements
in either direction (The full synthetic long straddle's transaction costs
caused the position to exceed the risk limit). The most this position
can lose is $524,000, resulting in a 1.9% loss on sales revenue.
This position is direction neutral. Movements in any direction will
yield a profit.
(Back
to Hedging Strategies)
(Click Here
to Go Back to the Project Homepage)