Put Options Bear Market Arbitrage:
Put Bear Market Arbitrage is established in the form of net debt (credit), and its maximum potential profit is also its largest potential risk. At maturity, according to the relationship between the subject matter and the execution, the profit and loss can be divided into different situations.
Scenario Analysis:
1.The underlying ** is lower than the low strike price:
P&L = Net Debt - High Strike Price + Low Strike Price.
2.The underlying ** is between the low strike price and the high strike price:
Profit & Loss = Net Claim - High Strike Price + Underlying Asset**.
3.The underlying asset** is higher than the high strike price:
Profit & Loss = Net Debt.
Option sauce collated and released.
Summary:
Maximum potential profit = net debt.
Maximum potential risk = Net Debt - High Strike Price + Low Strike Price.
Break-even Point = High Strike Price - Net Debt.
Key points:
Put option bear market arbitrage is a net lender trade with cash inflows when established.
* provides protection in the downward direction for the put option that is sold.
Even if the arbitrage is established with out-of-the-money options, a slight amount of the underlying can bring profit to the arbitrage.
When a position is profitable, the loss of time is against it;When faced with a loss, the loss of time is in its favor.
Volatility is favorable when a position is at a loss;Volatility is unfavorable when a position is profitable.