What must the credit suisse strategist have been expecting

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Reference no: EM131305250

The following appeared in an article in the Wall Street Journal: Credit Suisse Group equity-derivatives strategist Sveinn Palsson suggests a "strangle" in the company's options. The strategy involves selling a call and a put, above and below the current share price.

In the case of Abercrombie & Fitch, Palsson recommends selling the August $85 calls and the August $65 puts, and collecting the combined premium of $5.30. At the time that this article was published, Abercrombie & Fitch's stock was selling at a price of $71.70. What must the Credit Suisse strategist have been expecting would happen to Abercrombie & Fitch's stock for this strangle strategy to be profitable?

Reference no: EM131305250

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