Chapter 06 · Section 6.1
Ratio Backspread-Bearish
This ratio backspread is 45 days before expiration.
Considering only the bearish side of the market, which of the following statements are true?
d) The passage of time increases profit/loss.
No. On the bearish side of the market, you are net long options. As time passes, long options positions lose time value, thereby decreases profit/ loss.
e) b and c
f) a and b
a) An increase in volatility decreases profit/loss.
b) An increase in volatility increases profit/loss.
c) The passage of time decreases profit/loss.
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