Construct profitt diagrams or profit tables

Assignment Help Corporate Finance

Reference no: EM13194827

Construct profitt diagrams or profit tables on expiration to show what position in IBM puts, calls and/or underlying stock best expresses the investor's objectives described below. As- sume IBM currently sells for $150 so that prot diagrams/ tables between $100 and $200 (in $10 increments) are appropriate. Also assume that "at the money" puts and calls cost $15 each. (As usual, the prot calculations ignore dividends and interest.)

(a) An investor wants upside potential if IBM increases but wants (net) losses no greater than $15 if prices decline.

(b) An investor wants to capture prots if IBM declines in price but wants a guaranteed limited loss if prices increase.

(c) An investor wants to capture prots if IBM declines in price and is ready to accept unlimited losses if prices increase. Further, the investor wants to break even if the stock price does not change between now and the maturity of the options.

(d) An investor wants to prot if IBM's upcoming earnings announcement is either unex- pectedly good or disappointingly bad.

Reference no: EM13194827

Questions Cloud

How much can sales increase without outside financing : If you need $0.80 in assets for every $1.00 in sales, by how much can sales increase without obtaining additional outside financing?

Most interesting of absolutists in your opinion-why : The posting should examine absolutism's causes, how it advanced, how it survived, and what legacy it left behind. Please have the word ABSOLUTISM in the subject line of your post. When you answer, here are some specific issues you might address (not ..

Operations research techniques : Operations research techniques were applied first in the area of human resource management where there was a great need for more quantifiable decisions.

Describe the three methods for categorizing health insurance : Identify and describe the three main types of health insurances in the U. S. Describe the three methods for categorizing health insurance in the U.S. Identify the three types of managed care plans and give the pros and cons of each for the health car..

Construct profitt diagrams or profit tables : An investor wants upside potential if IBM increases but wants (net) losses no greater than $15 if prices decline and an investor wants to capture prots if IBM declines in price but wants a guaranteed limited loss if prices increase.

Renaissance harmony and polyphony : Despite advances in other areas, Renaissance harmony and polyphony remained restricted to the music rules that governed most of the Medieval period.

State the average kinetic energy of the molecules in a gas : The average kinetic energy of the molecules in a gas sample depends only on the temperature, T. But given the same kinetic energies, a lighter molecule will move faster than a heavier molecule.

State what wavelength does spica emit the maximum of light : Spica has a surface temperture of 23kK (2.3 x 10^4 K). At what wavelength does Spica emit the maximum intensity of light?

How were non-protestant religions accepted : How were non-protestant religions accepted in the United States from the early 19th Century to the 1920? In particular, answer this question for each of the following faiths. Also, list the organizations that arose to limit or counter the influence o..

User Account

All Pages