Annuities and Other Retirement Products: Designing the Payout Phase (Directions in Development) 11 ppt

Annuities and Other Retirement Products: Designing the Payout Phase (Directions in Development)_8 pptx

... losing value because the stock is moving away from them, but they are gaining value as the increasing implied volatility increases their premium. There is increased demand for them because they ... to remain relatively stable when the underlying remains in the cur-rent trading range. The belly of the skew accounts for this. The increasing slopes of the parabolic skew indicate that the implied ... But as the underlying increases in price, the long put gradually loses its correlation with the stock or underlying, and the upside profit is maintained.It is no coincidence that at -the- money...

Annuities and Other Retirement Products: Designing the Payout Phase (Directions in Development)_11 ppt

... they both change the same amount in either case. If the underly-ing moves up, the 0.50 delta call increases in value at half the rate of the underlying, while the 0.50 delta put decreases in ... 0.45(d) 111 – 0.45 = 110 .55 (e) 0.45/1.55 = $29 at risk for each potential return of $1.00, or 1/3(f) 115 .22 – 110 .55 = 4.67; 4.67 /115 .22 = 4%(g) SPDR107.00 108.00 109.00 110 .00 110 .55 111 .00 112 .00 ... Given the following options, which are expressed in ticks and whose multi-plier is $50, and given their thetas expressed in dollars and cents, calculate the approximate new value of the options...

Annuities and Other Retirement Products: Designing the Payout Phase (Directions in Development)_1 doc

... components. The first of these is the amount equal to the difference between the strike price and the price of the underlying, and it is termed the intrinsic value. The second component is the time ... the underlying to’ the opposing party. The other party, the put seller, consequently incurs the potential obligation to purchase the underlying.Buying putsSuppose you own XYZ, and it is currently ... 90 and 85. These in -the- money’ calls, as they are known, cost progressively more as their distance from the underlying increases. Where the underlying is a stock, many investors purchase these...

Annuities and Other Retirement Products: Designing the Payout Phase (Directions in Development)_2 docx

... carry of the index, and the amount of dividends contained in the index. The costs of carry and dividends are added and discounted in the same manner as options on individual stocks. These options ... price remaining in the money also increases with time. The delta of an at -the- money option remains at 0.50. Table 5.2 is another set of options contracts on the above underlying; it is the same ... rather than ring the last amount of time decay from it and risk an unwanted position in the underlying. If you wait until the morning of expiration, you may find that you are joined by others...

Annuities and Other Retirement Products: Designing the Payout Phase (Directions in Development)_3 pdf

... rate as they approach expiration. The at -the- money options, the 380s, have the most increase in theta because they contain the most time premium. Those nearest the money, the 360s and the 400s, ... 1 point decrease in the underlying, the combined delta decreases by 0.026: the put increases its delta by 0.013, and the call decreases its delta by 0.013. In other words, as the underlying ... decay and therefore has negative theta.Tables 6.3 and 6.4 are similar to the previous Tables 6.1 and 6.2, but they include the daily theta numbers for all the contracts listed. Here, the theta...

Annuities and Other Retirement Products: Designing the Payout Phase (Directions in Development)_4 potx

... strike, or 111 . This is calculated as the difference between the strike prices minus the income from the spread: (113 – 111 ) – 0.50 = 1.50.1.5210.50–0.5–1109 110 111 112 113 114 115 Figure ... profit. The probability of either spread expiring in the money can be approxi-mated by the delta of the strike that is nearest the underlying. In the above examples, both the 117 call and the 113 ... risk/return ratio of 1/3.6 In tabular form the expiration profit/loss is as in Table 8.4.Table 8.4 Long SPY June 113 111 put spreadMicrosoft109 110 111 112 112 .50 113 114 115 Spread debit–0.50...

Annuities and Other Retirement Products: Designing the Payout Phase (Directions in Development)_5 doc

... cover their risk by selling futures. Then the other players in the market needed to sell futures in order to cover their risk. The market went down and down. Traders were ringing us up, asking ... called the cylinder. If XYZ is at 100, you may buy the 110 call and sell the 85 put in the same transaction. In order to trade this spread, you must be reasonably certain that the underlying ... multiplier of $100 The August options are shown in Table 10.1.Another way of financing a long call position is to sell a put 11  Volatility spreads 111 and the potential return is the full amount...

Annuities and Other Retirement Products: Designing the Payout Phase (Directions in Development)_7 pot

... that there were better ways of capturing the upside. These are outlined in the examples at the end of Chapters 1 and 2, and they are called substitution trades. 15  The interaction of the ... expiration. The lower break-even level for your position is the price at which the call income equals the decline in the stock price. This is calculated as the price of the stock minus the income ... stock and write the call, and if there are no dividends involved, and if you’re a short-term investor, then just sell the in the money put and save yourself commissions. You’ll have the same...

Annuities and Other Retirement Products: Designing the Payout Phase (Directions in Development)_10 pdf

... certain – that they increased the volume of their derivatives exposure in order to maintain their profit level. Fair enough. But they also increased their lever-age. They tried to apply the ... in the long synthetic just as they are with a futures contract. In this example, there were no dividends through expiry.) During the next 75 days the difference between the synthetic and the ... that the market punishes hubris. So beware of reading this book: it may lead to you being fired.One thing they all had in common: they cut costs while increasing risk. In other words, they...

iras 401ks and other retirement plans, taking your money out 7th (2006)

... you inherited from your mother, you pay tax on the fair market value of the assets on the date of distribution. And if your mother had some basis left in the account, that re-maining basis ... amount. The computation must be repeated every year to take into account variations in invest-ment returns and other factors and then to adjust the amount of the contribution to ensure the goal ... would otherwise remain in the retire-ment account. But also, the tax advantages of averaging decline as the distribution in- creases in amount. In addition, the top tax rates in 1986 were quite...

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