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Ask Agatha

Agatha's expertise helps Natacha decipher Petrov's financial turmoil after a celebratory dinner. Learn about options trading and market expectations. Discover how to navigate sudden financial stress with love and clarity.

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Ask Agatha

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  1. Ask Agatha André Farber

  2. Executive summary • June 25, 2004: Petrov takes Natacha out for dinner + offers earrings. • After this celebration, Petrov becomes unusually nervous. • Natacha discovers that Petrov went short on a straddle. • She writes Agatha for advice.

  3. 1) What does it mean “being short on a straddle”? Does it have anything to do with horses? Why did Petrov go short on a straddle? • Nothing to do with horses. • Petrov sold two options on the Chicago Board of Exchange: • 1 call on S&P 500, Maturity December, Strike 1,140 • 1 put on S&P 500, Maturity December Strike, 1,140

  4. 2) What evolution of the S&P 500 did Petrov expected on the day of our wedding anniversary?

  5. 3) How much money did he earn by going short on this straddle?

  6. 4) Does the recent history of the S&P 500 index explain why Petro became so nervous? Did we loose any money?

  7. 5) What should I tell Petrov? I love you.

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