The Spread Is Less Expensive Than A Straddle Option And This Is Why

by David Jenyns on May 15, 2007

The Spread Is Less Expensive Than A Straddle Option And This Is Why
Besides arranging for the purchase and sale of new options on order, some option-dealers carry an inventory of option contracts which they offer for resale through newspaper advertisements, as on page 32 or by quotation sheets sent through the mail. The offerings may be limited in quantity and are offered subject to prior sale or price change. Originally, these contracts are bought by an option-dealer in the expectation and hope that he can resell them. If the dealer holds a Call contract and the market favors him, he might very well be able to dispose of the contract at a profit. If the market declines, the option may prove to be a complete loss to the dealer, but this is a business risk that he takes.

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