Iron Butterfly and Iron Condor Option Strategies on Indian Banking Sector
Journal Title: International Journal of Business and Management Invention - Year 2019, Vol 8, Issue 1
Abstract
The aim of this paper is to test the returns an individual investor would make by investing in two different option spread strategies namely, Iron Butterfly and Iron Condor strategy on the Indian Banking sector stocks. The option contract chain for the top 3 listed banks based on the market capitalization is considered for the month of December 2018 to design the strategies and the returns were calculated using the stock information on maturity. The paper also accommodates the possible returns that the investor would have made had the all the call options been exercised and had all the put options been exercised by assuming the spot rate higher and lower than the maturity spot rate respectively. The returns obtained from both the strategies under these circumstances are checked for equality on individual bank stocks by interpreting the results for a hypothesis test concerning the equality of the population means of two approximately normal distributed populations. The equality of returns from both strategies varies for different banks in different circumstances which forms the conclusion of the presented paper.
Authors and Affiliations
Gauraang Sharma, Jonathan Rodrigues, Harsh Dhanuka
Keywords
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