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Return Analysis on Contract Option Using Long Straddle Strategy and Short Straddle Strategy with Black Scholes

Deannes Isynuwardhana () and Gisyari Nurul Istiqamah Surur

International Journal of Academic Research in Accounting, Finance and Management Sciences, 2018, vol. 8, issue 4, 16-20

Abstract: Investment in the capital market never had any risk. The greater the risks level of an asset, the greater the risk of the asset, and vice versa. One of the risks is the fluctuated stock price movement. Derivatives instruments can be used to mitigate the risk of investment. One of the derivatives instruments traded in Indonesia is option contract. This study aimed to analyze the return on contract option using long straddle strategy and short straddle strategy with Black Scholes model. In addition, this study also compares which strategies are better between the two strategies. The sample in this research was determined by purposive sampling method to obtain 5 companies as a sample. Based on the results, long straddle strategy is the best strategy because the profits are unlimited and the loss is limited to call and put premium. For investors who want to invest in the derivatives market, in particular contracts option investors should look at the movement of stock prices. If the movement of stock increased or decreased drastically, then the best would be long straddle strategy. In addition, investors should choose an option contract with a validity period of 2 months because of the potential to provide greater profits.

Keywords: Derivative; contract option; long Straddle; short straddle; Black Scholes (search for similar items in EconPapers)
Date: 2018
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