(a) For what specific situation would a short position on put options on S&P 500

Question

(a) For what specific situation would a short position on put options on S&P 500 index be helpful? For what specific situation would a bear spread with put options on Japanese Yen be helpful? For what specific situation would a long position on call options on Euro futures contracts be helpful? Please explain in detail.

(b) For what specific situation would hedging with a long position on Treasury bond futures contract be helpful? For what specific situation would a hedging with a short position on natural gas futures be helpful? Please explain in detail.

Explanation / Answer

We sell put when we belive market is going to go up hence, short put on S&P will be helpful when we believe market is going to go up or bullish and we might have to short cover

We take bear put spread when we think underlying is going to go down hence, bear put spread on Japanese Yen will be helpful when Yen is going to depreciate and we would receive yen in future

We buy call when we believe the market is going to go up hence, long call on Euro futures will be helpful when we think euro is going to appreciate and we need euros later

Long on treasury means we benefit when Treasury bond futures go up or rates go down, long on treasury bond futures will be helpful when we think rates are going to go down and we have an asset which is positive on interest rates and we have a lending obligation later

SHort futures mean we benefit when price go down, short on natural gas futures will be helpful when we think price of natural gas goes down and we are a natural gas producer or supplier

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