Option Spread. Drunken Risibility.

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The term spread refers to the difference in premiums between the purchase and sale of options. An option spread is the simultaneous purchase of one or more options contracts and sale of the equivalent number of options contracts, in a different series of the class of options. A spread could involve the same underlying:

  •  Buying and selling calls, or
  •  Buying and selling puts.

Combining puts and calls into groups of two or more makes it feasible to design derivatives with interesting payoff profiles. The profit and loss outcomes depend on the options used (puts or calls); positions taken (long or short); whether their strike prices are identical or different; and the similarity or difference of their exercise dates. Among directional positions are bullish vertical call spreads, bullish vertical put spreads, bearish vertical spreads, and bearish vertical put spreads.

If the long position has a higher premium than the short position, this is known as a debit spread, and the investor will be required to deposit the difference in premiums. If the long position has a lower premium than the short position, this is a credit spread, and the investor will be allowed to withdraw the difference in premiums. The spread will be even if the premiums on each side results are the same.

A potential loss in an option spread is determined by two factors:

  • Strike price
  • Expiration date

If the strike price of the long call is greater than the strike price of the short call, or if the strike price of the long put is less than the strike price of the short put, a margin is required because adverse market moves can cause the short option to suffer a loss before the long option can show a profit.

A margin is also required if the long option expires before the short option. The reason is that once the long option expires, the trader holds an unhedged short position. A good way of looking at margin requirements is that they foretell potential loss. Here are, in a nutshell, the main option spreadings.

A calendar, horizontal, or time spread is the simultaneous purchase and sale of options of the same class with the same exercise prices but with different expiration dates. A vertical, or price or money, spread is the simultaneous purchase and sale of options of the same class with the same expiration date but with different exercise prices. A bull, or call, spread is a type of vertical spread that involves the purchase of the call option with the lower exercise price while selling the call option with the higher exercise price. The result is a debit transaction because the lower exercise price will have the higher premium.

  • The maximum risk is the net debit: the long option premium minus the short option premium.
  • The maximum profit potential is the difference in the strike prices minus the net debit.
  • The breakeven is equal to the lower strike price plus the net debit.

A trader will typically buy a vertical bull call spread when he is mildly bullish. Essentially, he gives up unlimited profit potential in return for reducing his risk. In a vertical bull call spread, the trader is expecting the spread premium to widen because the lower strike price call comes into the money first.

Vertical spreads are the more common of the direction strategies, and they may be bullish or bearish to reflect the holder’s view of market’s anticipated direction. Bullish vertical put spreads are a combination of a long put with a low strike, and a short put with a higher strike. Because the short position is struck closer to-the-money, this generates a premium credit.

Bearish vertical call spreads are the inverse of bullish vertical call spreads. They are created by combining a short call with a low strike and a long call with a higher strike. Bearish vertical put spreads are the inverse of bullish vertical put spreads, generated by combining a short put with a low strike and a long put with a higher strike. This is a bearish position taken when a trader or investor expects the market to fall.

The bull or sell put spread is a type of vertical spread involving the purchase of a put option with the lower exercise price and sale of a put option with the higher exercise price. Theoretically, this is the same action that a bull call spreader would take. The difference between a call spread and a put spread is that the net result will be a credit transaction because the higher exercise price will have the higher premium.

  • The maximum risk is the difference in the strike prices minus the net credit.
  • The maximum profit potential equals the net credit.
  • The breakeven equals the higher strike price minus the net credit.

The bear or sell call spread involves selling the call option with the lower exercise price and buying the call option with the higher exercise price. The net result is a credit transaction because the lower exercise price will have the higher premium.

A bear put spread (or buy spread) involves selling some of the put option with the lower exercise price and buying the put option with the higher exercise price. This is the same action that a bear call spreader would take. The difference between a call spread and a put spread, however, is that the net result will be a debit transaction because the higher exercise price will have the higher premium.

  • The maximum risk is equal to the net debit.
  • The maximum profit potential is the difference in the strike
    prices minus the net debit.
  • The breakeven equals the higher strike price minus the net debit.

An investor or trader would buy a vertical bear put spread because he or she is mildly bearish, giving up an unlimited profit potential in return for a reduction in risk. In a vertical bear put spread, the trader is expecting the spread premium to widen because the higher strike price put comes into the money first.

So, investors and traders who are bullish on the market will either buy a bull call spread or sell a bull put spread. But those who are bearish on the market will either buy a bear put spread or sell a bear call spread. When the investor pays more for the long option than she receives in premium for the short option, then the spread is a debit transaction. In contrast, when she receives more than she pays, the spread is a credit transaction. Credit spreads typically require a margin deposit.

Žižek’s Dialectical Coincidentia Oppositorium. Thought of the 98.0

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Without doubt, the cogent interlacing of Lacanian theorization with Hegelianism manifests Žižek’s prowess in articulating a highly pertinent critique of ideology for our epoch, but whether this comes from a position of Marxist orthodoxy or a position of a Lacanian doctrinaire who monitors Marxist politics is an open question.

Through this Lacanian prism, Žižek sees subjectivity as fragmented and decentred, considering its subordinate status to the unsurpassable realm of the signifiers. The acquisition of a consummate identity dwells in impossibility, in as much as it is bound to desire, provoked by a lacuna which is impossible to fill up. Thus, for Žižek, socio-political relations evolve from states of lack, linguistic fluidity, and contingency. What temporarily arrests this fluid state of the subject’s slithering in the realm of the signifiers, giving rise to her self-identity, is what Lacan calls point de capiton. The term refers to certain fundamental “anchoring” points in the signifying chain where the signifier is tied to the signified, providing an illusionary stability in signification. Laclau and Mouffe (Hegemony and Socialist Strategy Towards a Radical Democratic Politics) were the first to make use of the idea of the point de capiton in relation to hegemony and the formation of identities. In this context, ideology is conceptualized as a terrain of firm meanings, determined and comprised by numerous points de capiton (Zizek The Sublime Object of Ideology).

The real is the central Lacanian concept that Žižek implements in his rhetoric. He associates the real with antagonism (e.g., class conflict) as the unsymbolizable and irreducible gap that lies in the heart of the socio-symbolic order and around which society is formed. As Žižek argues, “class struggle designates the very antagonism that prevents the objective (social) reality from constituting itself as a self-enclosed whole” (Renata Salecl, Slavoj Zizek-Gaze and Voice As Love Objects). This logic is indebted to Laclau and Mouffe, who were the first to postulate that social antagonism is what impedes the closure of society, marking thus its impossibility. Žižek expanded this view and associated antagonism with the notion of the real.

Functioning as a hegemonic fantasmatic veil, ideology covers the lacuna of the symbolic, in the form of a fantasy, so that it protracts desire and hence subjectivity. On the imaginary level, ideology functions as the “mirror” that reflects antagonisms, that is to say, the real unrepresentable kernel that undermines the political. Around this emptiness of representation, the fictional narrative of ideology, its meaning, is to unfurl. The role of socio-ideological fantasy is to provide consistency to the symbolic order by veiling its void, and to foster the illusion of a coherent social unity.

Nevertheless, fantasy has both unifying and disjunctive features, as its role is to fill the void of the symbolic, but also to circumscribe this void. According to Žižek, “the notion of fantasy offers an exemplary case of the dialectical coincidentia oppositorium”. On the one side, it provides a “hallucinatory realisation of desire” and on the other side, it evokes disturbing images about the Other’s jouissance to which the subject has no (symbolic or imaginary) access. In so reasoning, ideology promises unity and, at the same time, creates another fantasy, where the failure of acquiring the anticipated ideological unity is ascribed.

Pertaining to Jacques Derrida’s work Specters of Marx (Specters of Marx The State of the Debt, The Work of Mourning; the New International), where the typical ontological conception of the living is seen to be incomplete and inseparable from the spectre, namely, a ghostly embodiment that haunts the living present (Derrida introduces the notion of hauntology to refer to this pseudo-material incarnation of the spirit that haunts and challenges ontological present), Žižek elaborates the spectral apparitions of the real in the politico–ideological domain. He makes a distinction between this “spectre” and “symbolic fiction”, that is, reality per se. Both have a common fantasmatic hypostasis, yet they perform antithetical functions. Symbolic fiction forecloses the real antagonism at the crux of reality, only to return as a spectre, as another fantasy.