Fillizola suggests that the client write 20 contracts of February 2020 call options with an exercise price of $140. The implied volatility of this option is 21.05%. Fillizola notes that if the share prices trend higher than $140, the client could effectively sell her shares at $145.40. If, however, shares prices move lower—for example, to $130—then her effective sale price would be $135.40. Fillizola notes that this strategy would be appropriate only if the expectation of the stock’s volatility is higher than the implied volatility of 21.05%.
With regard to the strategy for Company A that Fillizola recommends, she is least likely correct regarding:
- the expectation of volatility of the underlying.
- the effective sale price if share prices move lower, to $130.
- the effective sale price if share prices trend higher than $140.
A is correct. Fillizola is incorrect regarding the expectation of volatility of the underlying compared with the implied volatility of 21.05%. The recommended strategy, a covered call, is appropriate if the expectation is that volatility of the underlying will be lower than the implied volatility of 21.05%. Fillizola is correct about the effective sale price if the stock is above $140. The stock gets called away at $140, and the effective sale price is $140 + $5.40 = $145.40. If the share price is $130, the client will sell at $130 and her effective sale price is $130 + $5.40 = $135.40.
解答中红色部分如何理解？为什么covered call只有在volatility小于implied volatility时才appropriate？
