This article proposes to minimize risk and maximize return using various stop-loss values for fourteen major strategies involving options. The following eight ‘option combination strategies': “covered call, protective put, protective collar, straddle, strangle, butterfly, bear call spread...

This paper improves continuous-time variance swap approximation formulas to derive exact returns on benchmark VIX option portfolios. The new methodology preserves the variance swap interpretation that decomposes returns into realized variance and option implied-variance.We apply this new...

This research adapts the Black-Scholes option pricing model that is widely used in practice to a world where investors only form sufficiently rational expectations (expectations that deviate from perfection without creating arbitrage opportunities). Within the no-arbitrage interval of market...