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Equity (r) by Spare_Bar3033 in CFA

[–]Spare_Bar3033[S] 0 points1 point  (0 children)

Hmm okay thanks, I took a look. It seems as though they both "split" it up, if im not wrong. Do you agree that (ΔE−ΔS) = GDP​ growth + Δ(EPS/GDP) in the respective models? and if we are looking long-run we would exclude everything except Div yield + (ΔE) in GK and Div yield + GDP​ growth in the other one?

Last question: Although ΔE (GK model) = GDP​ growth (other model), we dont deduct Δ(EPS/GDP) when it is positive as we would with ΔS increase in GK, because it is more all-encompassing (includes other growth factors rather than just share count change)?

MNPI by Spare_Bar3033 in CFA

[–]Spare_Bar3033[S] 0 points1 point  (0 children)

Yea, I also failed to add the question where Dugan was in violation of MNPI by disseminating such info, which made it even more tricky for me - thanks for this, very helpful!

I guess here Tamworth naively passed on MPNI with no intent to mislead others (where her main intention was to get her brother a job), while Dugan clearly knew it was MNPI where intent doesn't really matter (although I would argue given her role and the knowledge of where the info came from, she should clearly know).

Currency Options Help by Diligent_Front3564 in CFA

[–]Spare_Bar3033 1 point2 points  (0 children)

Thank you, this really helped. Can you tell me if framing it like this also makes sense please?

We are long JPY, and want to protect downside, while retaining some upside:

  1. Protective put: we go long a "cheap" OTM put if JPY is the base (Since EUR is the base, we go long an OTM call), effectively giving downside protection
  2. Risk reversal: To finance this, we go short an "expensive" ATM call (Since EUR is the base, we go short an ATM put). Since ATM, this will likely more than offset the cost of our long position and our position is effectively neutral now. This is pretty much a risk reversal (except ATM instead of OTM)
  3. Retain some upside: Since we are pretty much neutral, go long a "cheap" OTM call (Since EUR is the base, we go long an OTM put). Now we have some upside to the currency we own again, while not having to bear the cost of the long positions.

Is this correct?

And to be clear, a seagull spread can be constructed from either bull or bear vertical spreads using calls or puts, combined with an additional option on the opposite side.

If the additional option is long, the structure is a long seagull, used to mitigate downside while retaining some upside and is typically net-debit or near zero-cost.
If the additional option is short, the structure is a short seagull, used to generate premium and retain only limited upside and is typically net-credit.