Stock Hedging Using Strangle Strategy on Vanilla Options and Capped Options


  • Donny Citra Lesmana IPB University
  • David Vijanarco Martal IPB University
  • Unika Nabila IPB University
  • Syifa Fauzia IPB University
  • Raymond IPB University
  • Zidni Kamal Hasan IPB University
  • M Ridwan Aprizky IPB University



Black Scholes Merton, capped option, hedging strategy, Monte Carlo simulation, stock value, vanilla option


The financial market often experiences unexpected fluctuations that can impact stock values. Therefore, investors require hedging strategies to protect their investment values from unwanted price fluctuations. This study compares the hedging results using the strangle strategy on Vanilla options and Capped options on Micron Technology, Inc. (MU) stock. The methods used are Monte Carlo simulation and Black Scholes Merton to calculate the option prices. The research results indicate that the strangle strategy on Vanilla options has unlimited maximum profit potential, whereas on Capped options, the profit is capped above. However, the potential maximum loss on Capped options is lower than that on Vanilla options. Therefore, Capped options are preferred for hedging the MU stock. The research yields significant practical and theoretical benefits. Practically, it offers investors insights into more effective hedging choices for risk management and profit potential in the stock market. Opting for capped options allows investors to control risk better while preserving profit potential. Theoretically, the study enhances our understanding of cost efficiency and risk profiles across various options strategies, making a vital contribution to financial literature.

Author Biography

Donny Citra Lesmana, IPB University

SCOPUS ID: 55682655785, SINTA ID: 6155411, GS ID: W1NfRGYAAAAJ


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How to Cite

Lesmana, D. C., Martal, D. V. ., Nabila, U., Fauzia, S., Raymond, R., Hasan, Z. K., & Aprizky, M. R. (2024). Stock Hedging Using Strangle Strategy on Vanilla Options and Capped Options. Jurnal Akuntansi Dan Keuangan, 26(1), 47-55.