You are an options portfolio manager. You are currently assessing the market, in search of an appropriate strategy to establish. The market is displaying the following characteristics: Over the past 6 months, markets have been quite unstable due to uncertainty about future political direction of the United States. After a resounding win for the incumbent party, the market is showing signs of relief that there may be political stability at least for the next four years. The volatility surface has been persistently for some time - especially in long dates. The most appropriate strategy to adopt would be to focus on establishing a long vega play. If your evaluation of the market is correct, you will benefit from a favourable higher shift in the volatility surface .

You are a portfolio manager running the AUD/USD options book for your bank. You have reviewed the risk profile of your portolio and have become concerned about a short vega position building up around 3 month maturity which approximates strikes circa. 22-28 delta on the AUD/USD downside coupled with a buildup of a similar long vega position for an AUD/USD topside move around the same dates and deltas. You are concerned that recent global economic forecasts point to a substantially lower AUD/USD rate in the coming months - and fear that other institutions may have a similar risk profile on their portfolio. This suggests that any downward move in the AUD/USD rate will be fast due to cascading stop loss orders hitting the market. The likelihood of a move higher for the AUD/USD seems unlikely at this stage. Based on these views, a downward move in the AUD/USD rate would likely be accompanied by a ? in implied volatility rates across the curve. The most appropriate protective strategy for your vega position might be to ? with a maturity around ? and delta(s) of approximately ? . As a further consequence, you expect to see a substantial ? in short dated (1 and 2 week maturity) implied volatility rates reflecting the higher market demand for ? protection due to higher actual volatility in the AUD/USD rate.

The most appropriate strategy to adopt would be to focus on establishing a what play. If your evaluation of the market is correct, you will benefit from what

Select the best option strategy for each of the investor objectives by selecting the matching number. (3 marks)  Write call options on stocks owned (Covered call) Write put options on stocks owned (Protective put) Buy put options1. Protect against potential losses on stocks owned.2. Generate additional yield on stocks being held for the long term.3. Use a limited amount of money to profit if a stock you believe is going down drops in value.

If an investor believes in increased price volatility, he or she is mostly likely to implement the following strategy:Question 9Select one:a.Long straddleb.Short straddlec.Vertical Bull spreadd.Call Bull spreade.Vertical Bear spreadf.Put bear spread

Create Viable Future Options