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Full-Text Articles in Finance
Option Strangles: An Analysis Of Selling Equity Insurance, Clemens Kownatzki, Hisam Sabouni
Option Strangles: An Analysis Of Selling Equity Insurance, Clemens Kownatzki, Hisam Sabouni
Graziadio Working Paper Series
Our results suggest, selling SPY strangles are generally profitable across a variety of widths. However, the payoff profile of a short option strangle exposes the contract seller to a potential for unlimited losses. Our evidence on maximum drawdowns indicates that losses on some positions can be the equivalent of the profits gained on approximately forty prior positions. This payoff profile has given rise to the metaphor of selling option contracts as the equivalent of “picking up nickels in front of a steam roller.” The goal of our paper is to analyze the full return characteristics of option strangles and to …
Small Business Lending And Social Capital: Are Rural Relationships Different?, Robert Deyoung, Dennis Glennon, Peter J. Nigro, Kenneth Spong
Small Business Lending And Social Capital: Are Rural Relationships Different?, Robert Deyoung, Dennis Glennon, Peter J. Nigro, Kenneth Spong
The Journal of Entrepreneurial Finance
We test whether rural versus urban location, and the amount of social capital present in those locations, influence the performance of Small Business Administration (SBA) 7(a) loans originated between 1984 and 2012. On average, we find that rural loans are about 11% less likely to default than urban loans, and that a standard deviation increase in social capital reduces default by about 5%. Surprisingly, these two effects are largely independent of each other, even though social capital is substantially higher in rural places than in urban places. Our findings advance the small business lending literature and offer insights for a …