Positions in an Option & the

Trading Strategies Involving Underlying (Figure 10.1, page 220)

Options
Chapter 10 Profit Profit

K
K ST ST
(a)
(b)
Profit Profit

K
ST K ST

(c) (d)
Options, Futures, and Other Options, Futures, and Other Derivatives
Derivatives, 7th Edition, Copyright 7th Edition, Copyright John C. Hull
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Types of Strategies Bull Spread Using Calls

(Figure 10.2, page 221)

Take a position in the option and the

underlying Profit
Take a position in 2 or more options of
the same type (A spread)
ST
Combination: Take a position in a
mixture of calls & puts (A combination) K1 K2

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Bull Spread Using Puts Bear Spread Using Calls
Figure 10.3, page 222 Figure 10.5, page 225

Profi
Profit t

K1 K2 ST K1 K2 ST

Options, Futures, and Other Derivatives Options, Futures, and Other Derivatives
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Bear Spread Using Puts Box Spread

Figure 10.4, page 223
A combination of a bull call spread and a
bear put spread
Profit If all options are European a box spread is
worth the present value of the difference
between the strike prices
If they are American this is not necessarily
K1 K2 ST so. (See Business Snapshot 10.1)

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Butterfly Spread Using Calls Calendar Spread Using Calls
Figure 10.6, page 227 Figure 10.8, page 228

Profit Profit

K1 K2 K3 ST ST
K

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Butterfly Spread Using Puts Calendar Spread Using Puts

Figure 10.7, page 228 Figure 10.9, page 229

Profit Profit

K1 K2 K3 ST ST
K

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A Straddle Combination A Strangle Combination
Figure 10.10, page 230 Figure 10.12, page 232

Profit Profit

K1 K2
K ST ST

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Strip & Strap

Figure 10.11, page 231

Profit Profit

K ST K ST

Strip Strap
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