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.9 Data Points for Short Volatility Binary Option TradeTrade Figure CalculationUnderlying asset S&P futuresMarket price 1250Expiration 1 dayStrike price long 1244Strike price short 1256Size long 1 contractSize short 1 contractPrice Ask price of > 1244contract: $73.9Bid price of > 1256contract: $26Total collateral $147.9 (Ask price + ( $100  bid price)) ×number of contracts = total collateral($73.9 + ($100  $26)) × 1 = ($73.9 +$74) × 1= $147.9 × 1 = $147.9Max loss $47.9 Higher of:(collateral of short position  profit oflong position) × number of contracts =max loss(($100  $26)  ($100  $73.9)) × 1 =($74  $26.1) × 1 = $47.9 × 1Or(collateral of long position  profit ofshort position) × number of contracts =max loss($73.9  $26) × 1 = $47.9 × 1 = $47.9Max profit $52.1 Revenue  total collateral = max profit$200  $147 = $52.1Risk vs.reward 1.09:1 Max profit / max loss = risk vs.reward$52.1 / $47.9 = 1.09:1REGULATING RANGE AND PAYOUT WITH STRIKE PRICESVolatility Trading Explained 117Buy 1 @ 73.9 Sell 1 @ 26100 10075 7550 5025 250 0EXHIBIT 8.10 Graphical Representation of the P&L on Both the Long and ShortPosition(return on collateral) will be higher than with a wider range.range than a narrower range at expiration.Contract Bid OfferDaily US 500 (Mar) > 1268 2.1 5Daily US 500 (Mar) > 1265 4.9 7.8Daily US 500 (Mar) > 1262 9.7 12.7Daily US 500 (Mar) > 1259 17 20Daily US 500 (Mar) > 1256 26 29Daily US 500 (Mar) > 1253 36.1 40.1Daily US 500 (Mar) > 1250 48.1 51.6Daily US 500 (Mar) > 1247 60.1 63.1Daily US 500 (Mar) > 1244 71.2 73.9Daily US 500 (Mar) > 1241 79.9 83.4Daily US 500 (Mar) > 1238 87.4 90.4Daily US 500 (Mar) > 1235 92.3 95.3Daily US 500 (Mar) > 1232 95.4 98.412 hours to expiration, futures trading at 1250EXHIBIT 8.11 Binary Option Chain118 BINARY OPTIONSour distribution tool at www.traderschoiceoptions.net.US S&P 500less likelymore likely1235 1245 1256 1265Normal Distribution CurveEXHIBIT 8.12 A Normal Distribution Curve  Volatility Trading Explained 119Short one contract of  > 1256 binary option and long one contract of  > 1244 binary optionProfit1001244 1256binary option binary option7550Max Profit = $52.125Price ofUnderlying 25 loss = $47.9 loss = $47.9 50The light grey shaded area representsthe loss of one long contract and the 75Market Priceloss of one short contract.(=1200)Loss  100The dark grey shaded area representsthe combined profit of one longcontract and one short contract.EXHIBIT 8.13 P&L Graph of a Short Volatility Binary Option TradeShort one contract of  > 1265 binary option and long one contract  > 1235 binary optionProfit100751235126550binary optionbinary option25Potential Profit = $9.6 Price ofUnderlying 25loss loss= $95.3 = $95.1 50Market Price(=1250) 75Loss  100The light grey shaded area represents theloss of one long contract and the loss ofone short contract [ Pobierz caÅ‚ość w formacie PDF ]