Strategies used in options contracts. comparison of straddle and strangle strategies in Borsa İstanbul

The options contract is one of the most important and commonly used derivative instruments in the world. Options were used only as hedging instruments at the beginning, now options contracts are being used by investors not only as hedging instrument but also as a speculation and arbitrage tool. Originally options were traded over-the-counter (OTC) markets, due to the increasing importance of them, whereupon, options carved out a niche for themselves at the organized markets. Futures and Options Market under the charge of Borsa Istanbul is the only organized market of options contracts traded in Turkey. One of the important features of options contracts is that it is possible to create option strategies by using more than one option contracts and to minimize the risks that may be faced by these strategies. In this study, the types, functionality, and pricing of options contracts are emphasized. In addition, information is given about option strategies and the profit/loss conditions of options have been investigated as a result of the used option strategies. In the application part of the study, options contracts written on BIST 100 index have been formed. The values of hypothetically generated option contracts are calculated using the Black & Scholes model and finally, with a calculated result of options, Straddle, and Strangle strategies have been formed. Keywords: Derivatives, Option, Option Pricing Models, Option Strategies.