1, buy eagle arbitrage model
Compound mode
Buy call (put) options with lower strike price, sell call (put) options with lower strike price, sell call (put) options with higher strike price, and buy call (put) options with higher strike price.
Available range
I'm not sure about the market outlook, but I hope the expiration date of the subject matter price can be between the middle and low execution price and the middle and high execution price. When investors think that the time price will be within a certain range, but want to invest in a more conservative portfolio than butterfly arbitrage, they will consider choosing this strategy.
Average transition point
There are two breakeven points:
1, high equilibrium point = medium and high execution price+maximum income.
2. Low balance point = medium and low execution price-maximum income
Maximum risk: net royalties
Maximum income: medium and low execution price-low execution price-net commission.
2. Eagle arbitrage model
Compound mode
Sell call (put) options with lower strike price, buy call (put) options with lower strike price, buy call (put) options with higher strike price, and sell call (put) options with higher strike price.
Available range
I'm not sure about the market outlook, but I hope the expiration date of the subject matter price can be lower than the low execution price or higher than the high execution price. When investors think that there will be an upward or downward breakthrough in the market, they will consider this strategy, but they think that the royalties paid for selling the butterfly portfolio are too high.
Average transition point
There are two breakeven points:
1, high balance point = high execution price-net royalty
2. Land balance point = low execution price+net commission.
Maximum risk: medium and low execution price-low execution price-net royalty
Maximum income: net royalties
Eagle arbitrage strategy is suitable for volatile market and can be used when the price change trend is unpredictable. It adopts the method of first-hand bull market spread and first-hand bear market arbitrage to make the portfolio gain as much as possible in the fluctuating market. Eagle arbitrage strategy can be regarded as a change of butterfly, but compared with butterfly, it has a larger profit balance point distance "wingspan".
The buying eagle arbitrage strategy is based on the shortcoming that the profit range of buying butterfly portfolio is relatively narrow, which opens the distance between the lowest execution price range and the highest execution price range and broadens the profit range of portfolio.
The basis of constructing buy eagle arbitrage strategy is usually to sell a virtual bullish contract and a virtual bearish contract at different execution prices. On the basis of large-span arbitrage, in order to protect these short positions, we buy a virtual call contract and a virtual put contract respectively. These four option contracts have the same type, the same maturity period but different execution prices.
Four Factors Affecting Eagle Arbitrage Strategy
1, the influence of implied volatility on eagle arbitrage strategy
Implied volatility is the market's expectation of the future volatility of related assets. Generally speaking, there is not much difference between implied volatility and historical volatility. If the implied volatility suddenly increases before the option expires, it will have a certain impact on our eagle arbitrage strategy.
First of all, if our strategy is to hold to maturity, its impact effect is mainly the possibility of additional margin, but the sudden and large amplification of implied volatility tells us that the eagle arbitrage strategy is not suitable because it is suitable for situations where the market volatility is low and the subject matter price is in a volatile state.
Therefore, before the eagle arbitrage strategy, it is necessary to analyze the implied volatility of the market and confirm the fluctuation trend of the market through observation and simulation of historical data. It should also be noted that if the implied volatility suddenly increases in the process of adopting the eagle arbitrage strategy, it is necessary to seize the best period of price increase and prepare for hedging and liquidation in advance to prevent further losses.
2. The influence of the option price on the eagle arbitrage strategy.
We have clearly known that the Eagle Arbitrage strategy is suitable for the fluctuating market, and when the price of the subject matter is between the middle and low execution price and the middle and high execution price, the strategy will get the greatest benefit. Therefore, when choosing options, we should try to choose options that have obvious pressure and support on the subject matter price in the market during the period from now to the expiration date, so that the possibility that the subject matter price is still between the middle and low exercise price and the middle and high exercise price will be greatly increased by the expiration date.
3. The influence of option expiration date on eagle arbitrage strategy.
In eagle arbitrage strategy, we should choose options with shorter term. Due to the influence of various market factors, the longer the time, the lower our ability to grasp the market trend, the more uncertain factors in the market fluctuation, and the more unstable the price change of the option subject matter. At this time, the greater the risk of adopting the eagle arbitrage strategy. In order to better grasp the trend development and better judge the price changes, try to choose short-term options, which can also maintain a certain liquidity and obtain benefits in a short time.
4. The influence of time change on eagle arbitrage strategy.
Eagle arbitrage option portfolio sells options with the same type and maturity as the purchased options, but the exercise price is different. This operation mode will make the four options have the same change with the change of time, thus offsetting the influence of the original time change on the options. Therefore, the adoption of eagle arbitrage option portfolio will not need to consider the change of time, which is one of the advantages of eagle arbitrage strategy.
? abstract
1, the profit of eagle arbitrage strategy comes from the wide fluctuation of the target price in the volatile market. For the purchase of eagle arbitrage option portfolio, when the option expires, if the subject matter price is less than the lowest option exercise price or greater than the highest option exercise price, the portfolio will suffer the greatest loss, and the greatest loss is the net premium of the option. At this time, the option strategy is a failure, which also shows that our market forecast is wrong, or the market price has changed abnormally because of various fluctuation factors.
If the underlying price is higher than the low exercise price but lower than the middle and low exercise price, or the underlying price is higher than the middle and high exercise price but lower than the high exercise price, the profit and loss of the Eagle Arbitrage Option Portfolio will be determined by the underlying price, and the portfolio may make a profit or a loss at this time. If the price of the subject matter is only the exercise price of the middle-low option and the exercise price of the middle-high option changes, the eagle arbitrage option portfolio will get the maximum income, that is, the difference between the middle-low exercise price and the lowest exercise price MINUS the net premium. At this time, the strategy achieves the best implementation effect, which also shows that our market forecast is correct.
2. Eagle arbitrage strategy can be regarded as a derivative combination of butterfly arbitrage. Its portfolio profit is not only based on the specific performance of market rising or falling, but also based on the influence on market fluctuation and various fluctuation factors of options. Its biggest advantage is that it doesn't care about the direction of the market.
3. In order to reduce the losses caused by uncertain factors, the eagle arbitrage strategy should choose options with short-term underlying price and wide fluctuation trend.
4. The best application scope of Eagle Arbitrage Strategy is the neutral market with low market volatility. If the market fluctuates greatly, it is best not to use the eagle arbitrage strategy. Therefore, it is also a good preparation to predict the implied volatility before adopting this strategy.
5. Eagle arbitrage strategy is a strategy with limited risk and limited income, which is a good choice for relatively conservative investors. Especially compared with butterfly arbitrage, the strategy of buying eagle arbitrage will be more conservative, and the strategy of selling eagle arbitrage will reduce certain royalties.