Optional contracts as the tools protecting from the variability on the capital markets
Optional contracts are the protection against the excessive variability on the capital markets. The presented strategies, Straddle, Strangle, Strip or Bear spread, can be divided into the ones that are protecting the investor from:
– a big variability, i.e.: Straddle and Strangle;
– a big drop, i.e.: Strip or Bear spread.
The researches show that the effectiveness of the strategies depends more or less on the situation present on the capital market, i.e. the variability, the cost of the given strategy and the investment expectations.