Option & Futures 以及相关知识

The bull market started in 1982 (the DJ was at 770).
It peaked in Aug. 1987.

1982 - 1987 的5年，市场上涨到了1,200

The first two weeks of Oct. it declined by about 14%. In Oct. 19, 1987 it dropped 22%, the SP500 index dropped 20.5%, the SP500 futures dropped 40%.
(On Oct. 28, 1929 the Dow dropped ‘only’12.8%).

过去35年，道琼斯上涨了27倍
Day to Day Volatility in 1973 – 1987 ≈ 15%

经历了5年的连续增长，开始有人专业卖Option，大多数是Put，有人卖Straddle
这些Seller在87年股灾中被清扫了

future 在10月19号的时候 只有201.50

所以要卖put的时候，最好要卖spread，而不是naked

需要讨论这些清算所包括Exchange在这种急剧的下跌中会不会有违约风险

Strike Price Spread
Maturity Spread
Box Spreads

借钱方，Sell the 90 Call，Buy the 100 Call
贷款方，Sell the 100 Put，Buy the 90 Put
对方买Box Spread，给premium
80 - 100 是股价空间
Call Spread：没有价值@80，
Put Spread：

Volatility Strategies
1.
2.
3.

1. Deviation
2. International ETF
3. 如果想投资日本市场ETF，面临两种风险，货币风险，市场价格风险

如果Future Price 高于 实物价格
Future is below fair value, short the spot, borrowing money
以Gold 为例，就是卖出Gold，借钱买Future

Index
The Carry = Interest Rate - Dividend Yield
Go back， compute each contract，interest rate

不是一定会在fair value上，会deviate的

Gold Silver

100 oz. 5000 oz.

F1 G = 1224.50 F1 S = 24.49
F2 G = 1250.49 F2 S = 24.91
f1,2 G = 2.1% f1,2 S = 1.7%

Since the implied forward rate from Gold futures is 2.1% which is larger than the implied forward rate from Silver futures, 1.7%, we should be borrowing forward in the Silver market and lend in the Gold market. Here is what it entails (the strategy).

Questions:

1. Is there an arbitrage opportunity?
   What transactions would provide arbitrage profits?
   What is the potential gain, if any?
   Assume no Transactions costs (TC), no storage costs and no borrowing fees for Gold or Silver.

套利者无法delivery，去市场上找institute借一些sliver，deliver，得到钱
借5000盎司白银，一年后还，付了一些fee给institute
持有一年

Buy at 1224.50 x 100 = 122,450 Sell at 24.49 x 5000 = 122,450
Sell at 1250.49 x 100 = 125,049 Buy at 24.91 x 5000 = 124,550

第二年要卖出黄金，然后买入白银，把白银还回去
这个例子只是研究了短期，但是长期来，必须保证一年后我可以买入白银，一年的commitment要贵一点

黄金和Financial Instrument一样，Investor不deliver，但是白银会deliver

commodity market 在 spot market 和 future market 偏差有区别
只有数秒的可能，有人jump in了，就把gap消除

At time 0 execute simultaneously the two calendar spreads.
At delivery time 1 borrow 5000 oz. of Silver and deliver;
get 122,450 and get delivery of 100 oz. of Gold for 122,450.

At delivery time 2 deliver 100 oz. of Gold and receive 125,049.
Get delivery of 5000 oz. of Silver and pay 124,550.
Return the borrowed Silver. Gain; 125,049 – 124,550 = 499.

In term of rates, the potential gain computed from the forward rates;
(f1,2G = 2.1%) – (f1,2S = 1.7%) = 0.4%

This is a basic exercise in forward rate arbitrage,
not accounting for borrowing costs, storage costs and transactions costs.
To do the arbitrage we need to incorporate all of these costs.

1. The borrowing costs of Silver are 0.05% ($61).
2. Storage costs of Gold are zero. No adjustment needed.
3. You could lend gold at 0.1% (of 122,450) = 122.5
4. Transactions costs associated with trading 2 calendar spreads and costs associated with the delivery process, amounting to 0.15% ($184) should be deducted from the arbitrage gains.

借白银的cost

Though some of the above costs are paid in year 1 while other costs (and benefits) are paid in year 2 we will assume (for simplicity) that all costs are paid in year 2 when the arbitrage gains are materialized. Thus, we deduct from the arbitrage gain, 499, the 2 costs (61+184) and add the lending fee (122.5).

NET GAIN = 499 + 122.5 - 245 = 376.5

Option

1. future contract definite both side, symmetric. Profit and Loss are symmetric

2. option buyer has right

3. TRADING: PIT, ELECTRONIC (Market Maker)

4. CLEARING: MARGINS AND M.T.M.
5. DELIVERY: EARLY EXERCISE (?), CASH (?)
6. REGULATION: SEC, CFTC, FINRA, NFA

14 Market Exchange, ISC 8%, 原来有20%，最开始30%
现在最主导的是CBOE，designated market maker, Goldman

margins only charge on seller

Option of ETF ETF is treated as a stock, American and physical deliver
Option of futures contract American，
Option of currency American，

SEC
CFTC Commodity Futures Trading Commission 商品期货交易委员会
FINRA Financial Industry Regulatory Authority 美国金融业监管局
NFA

3 Option

SPX Options on the Index
SPF Options on the futures
SPDR Options on the ETF

State Street Global Advisors (SSGA)

SPDR funds (pronounced “spider”) are a family of exchange-traded funds (ETFs) traded in the United States, Europe, and Asia-Pacific and managed by State Street Global Advisors (SSGA).

Wiki of SPDR
The name is an acronym for the first member of the family, the Standard & Poor’s Depositary Receipts, now the SPDR S&P 500 (NYSE Arca: SPY), which is designed to track the S&P 500 stock market index. For a long time, this fund was the largest ETF in the world. SSGA also manage the SPDR Gold Shares, which for a while was the second-largest ETF in the world.[3] As of August 2012, they were the first and second largest exchange-traded products in the world.

The funds are formulated as unit investment trusts.
In 2007, SSGA rebranded its other United States ETFs as SPDRs, including the StreetTRACKS family and its other flagship ETF shares, the DOW DIAMONDS (NYSE Arca: DIA), that tracks the Dow Jones Industrial Average. This move united all U.S. ETFs managed by SSGA, a total of 23 at that time, under a single brand.

At the end of 2006, the total portfolio that became known as SPDRs had $102 billion of assets under management.

**As of June 2013:
SPDR is the second largest ETF provider, behind iShares, and ahead of Vanguard, with assets of $337 bn.**

Plain Vanilla Option
Exotic Option

Warranty 知道对手方是谁
Convertible Bond 是Option和Bond的合成

Exchange会设置不同价格的Option

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Review of Options Strategies

Basic Strategies of a Put
想买Amazon，如果现价是100，如果跌到95就买
limit order也行，但是这样不如写个Put，还有个Premium可以收