NISM Series XVI - Commodity Derivatives Exam Notes
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Vertical Spreads are classified into bull spreads and bear spreads. In a bull spread, the investor buys a lower strike and sells the higher strike. Conversely, the investor sells the lower strike and buys a higher strike in a bear spread.
Horizontal spreads, also known as calendar spreads, attempt to profit from expected moves in volatility. Horizontal spreads are implemented by buying and selling options with the same strike price but different expiry months.
Diagonal spreads attempt to profit from market view and changes in volatility. Diagonal spreads are implemented by buying and selling options with different strike prices and different expiry months.
Long Straddle is an option strategy where the trader buys a call and a put with the same strike price and same expiry date by paying premium.
Long Strangle involves the purchase of a call and a put with the same expiry date but with different strike prices.
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