Comment on Query of the Day

Satish,

A lot of people would have bought options both calls and puts assuming volatility in the stock and hence pushing the premium prices higher for both.

Yes the stock went up, but not in the same proportion as the premiums and hence after the result the premiums for all call and put options dropped for ITM, ATM and OTM.

Taking buys in both calls and puts with different strikes is not a hedging strategy, it is actually called a long strangle which is a volatility strategy. This strategy will make money only when volatility of the underlying stock goes up above a certain point.

Hope this clarifies.

View the full comment thread »