Use of options in stock price speculation

Reference no: EM13826993

Problem:

On Oct. 5th, Reem purchased 2500 shares of Mediterranean Co. stocks at €35 per share and 1500 shares of KFD at €28 per share. According to financial analysts' report, in the coming three months Mediterranean and KFD stock prices may decline. To hedge herself Reem purchased two American option from Amro expired after three months, paid €3.5 for Mediterranean exercise price was €35 and paid €3.3 for KFD exercise price was €28. On Nov 20th, Mediterranean and KFD stock prices were €41.25 and €23 respectively.

a- What is the type of the option contracts?

b- Analyze Reem position on Nov 20th.

c- Analyze Amro position on Nov 20th.

Summary of problem:

This question basically belongs to Finance as well as it explains about the use of options in stock price speculation. A person who buys stock from two companies and realizes that the stock prices might decline in the near future and purchases options. The position after the expiry of the options has been analyzed.

Reference no: EM13826993

Questions Cloud

Type of the option contracts : On Aug 10th, Ali expected that Tower stock price will increase during the coming two months. Therefore, he purchased an option for $4 per share; exercise price was $40 per share, On Sept 20th, Tower stock price was $50 per share.

Draw and explain the demand curve facing each firm : This problem from economics and it is describe the kinked demand curve, a dilemma in most microeconomic scenarios where two or more competing firms wage price wars and arrive at a price which seems to be kinked when plotted on a graph.

Sunk costs are relevant when making decisions : Sunk costs are relevant when making which of the following decisions?

Describe the organizational systems that are affected : Describe the problems presented in the case study at both the macro and micro level. Describe the causes of the problem. Describe the organizational systems that are affected.

Use of options in stock price speculation : On Oct. 5th, Reem purchased 2500 shares of Mediterranean Co. stocks at €35 per share and 1500 shares of KFD at €28 per share. According to financial analysts' report, in the coming three months Mediterranean and KFD stock prices may decline.

Compute the number of units transferred to finished goods : During May, the production department of a process manufacturing system completed a number of units of a product and transferred them to finished goods. Compute the number of units transferred to finished goods.

Evaluation of advertising effectiveness at axa life insuranc : Evaluation of Advertising Effectiveness at AXA Life Insurance

Law of chemical combination : Can you explain in detail about LAW OF CHEMICAL COMBINATION

Made an investment in certain equipment : Tilly's Travel Service has made an investment in certain equipment that cost the company $366,741. The equipment is expected to generate cash inflows of $51,000 each year. Use your financial calculator or excel to determine how many years the equipme..

User Account

All Pages