Thanks Fabian, i passed level 3 exam, i think your video here is such a good resources to help us learn about how to practically use the knowledge and your explanation is clear. I would like to express my gratitude and thank you here.
Wow, you did it! Passing the CFA Level 3 is no small feat, and I couldn't be happier for you. 🎉 Thanks for the shout-out about my video. It's awesome to hear that it helped you in your study journey. Your success is the best reward I could ask for.
so is there a difference in payoffs between put bull spread and bull call spread? wouldn't max loss just be your net in/outflow when buying/shorting both puts? i.e. they both expire out of the money, have a value of $0 and you are just out of pocket whatever you paid Thanks
Hi Fabian, quick one if you dont mind. When you long a put option you pay money, when you short an option, you receive money. Should this not be 6-1.20 =$4.80?
Hi, Thank you for your comment. To clarify, the value (V) I mentioned in the video relates to the net position of the strategy, akin to how we calculate net worth in a balance sheet (assets minus liabilities). In this context, pH - pL indeed represents the net cash inflow received by the trader at the outset of the strategy (+4.80). However, V0, the initial value of the position (pL - pH), reflects the net exposure of the strategy. Since it's a net short position in this case, the value is represented as -4.80. I hope this explanation clarifies the distinction between the cash flow and the net position value.
This is SO WRONG correctly stated, bull put spread sells the higher strike put and conversely buys the lower put however, selling earns the premium, so you get 6 you dont pay 6... you pay the premium when you buy (i.e. the lower strike put) so, the value = pH - pL, NOT pL - pH at 1:28, he correctly states that "the amount that you receive from selling the put is more than what you pay for it", so why is it written that the initial put value is -4.80?
Hi Robin, Thank you for your comment. To clarify, the value (V) I mentioned in the video relates to the net position of the strategy, akin to how we calculate net worth in a balance sheet (assets minus liabilities). In this context, pH - pL indeed represents the net cash inflow received by the trader at the outset of the strategy (+4.80). However, V0, the initial value of the position (pL - pH), reflects the net exposure of the strategy. Since it's a net short position in this case, the value is represented as -4.80. I hope this explanation clarifies the distinction between the cash flow and the net position value.
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