Did anyone make a list of the different options strategies and what their opposite position would look like? You know this is going to be on the exam. For instance, a long straddle is equivalent to a reverse butterfly, etc?
FYI: a long straddle is NOT equivalent to a reverse butterfly
Listen to Naples for he is right. If you know how the butterfly is structured and can draw the pay-off diagram… you know what the opposite position looks like. Just get your piece of paper and turn it upside down. It’s really that simple.
Yes I did. I drew all the payoff diagrams and their associated max profits, max losses and BEPs. Long straddle is ALMOST the same as a short butterfly (shape wise). Profits/Losses/BEPs are not simply a reverse though.
Almost the same != equivalent What are BEPs by the way? Straddle consist of two options, one call and one put. Butterfly consists of just calls or puts. Max loss is infinite for short straddle (short call…), not for a butterfly since there the call with highest strike, at that strike profit’s of long calls and short calls cancel eachother out, so no more loss with higher spot while short straddle will continue to loose money.