> why did the put option fail to hedge the forward? They essentially bought a call option. Remember, (bought forward + put option) = call option [1] They were

> why did the put option fail to hedge the forward? They essentially bought a call option. Remember, (bought forward + put option) = call option [1] They weren't 'hedging' anything, they just wanted to gamble that the stocks would go up. Obviously, that didn't happen. Because all they bought were options, they lost a lot less money than if they had simply bought the same notional amount in actual bank stock. > Volatility went through the roof that option should have been a gold mine! Options increase in value when volatility increases only if the stock price doesn't change. If you hold a call and the underlier tanks, it generally doesn't matter than the volatility shot up (unless the option is super long-dated). Try it yourself: http://www.option-price.com/ http://www.option-price.com/ [1] https://en.wikipedia.org/wiki/Put%E2%80%93call_parity#Implications https://en.wikipedia.org/wiki/Put%E2%80%93call_parity#Implic...