Chapter 06 · Section 6.1
Citicorp Puts
For the Citicorp stock, quoted at 11 7/8, the table below shows the prices for the puts traded on the Chicago Board Options Exchange. You estimate that the underlying has not yet reached its lowest point, but you want to take advantage of the temporary spreads between the prices.
Puts Citicorp
Strike January February April
12.5 1/4 1 1/4 1 3/8
15 2 1/2 3 1/4 3 3/8
17.5 5 1/4 5 1/2 5 3/8
20 7 1/2 7 7/8 8 7/8
Which spread will you execute?
b) Buy Feb 15 / Sell Feb 17.5
No. You are bearish, but the position you entered is a bull put spread. As well, the February 15 put is overvalued in comparison to the other puts with the same stike price.
c) Buy Jan 20 / Sell Feb 20
a) Buy Apr 12.5 / Sell Feb 12.5
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