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?

a) An increase in volatility decreases profit/loss.
b) An increase in volatility increases profit/loss.
c) The passage of time decreases profit/loss.
d) The passage of time increases profit/loss.
e) b and c
• f) a and b
  No. Since we are only looking at one side of the market, you answers are contradictory.

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