Reference no: EM13890917
Problem 1
The following quotes were observed for options on a given stock on November 1 of a given year:
|
|
Calls
|
Puts
|
|
Strike
|
Nov
|
Dec
|
Jan
|
Nov
|
Dec
|
Jan
|
|
105
|
8.40
|
10
|
11.50
|
5.30
|
1.30
|
2.00
|
|
110
|
4.40
|
7.10
|
8.30
|
0.90
|
2.50
|
3.80
|
|
115
|
1.50
|
3.90
|
5.30
|
2.80
|
4.80
|
4.80
|
a. Under what circumstances will the holder of the January 110 call make a gain?
b. Under what circumstances will the holder of the November 115 put make a gain?
c. Under what circumstances will the holder of the December 105 call make a gain of $200?
d. Under what circumstances will the December 105 call be exercised?
e. Under what circumstances will the holder of the November 110 put be obligated to exercise his option?
Problem 2
The following prices are available for call and put options on a stock priced at $50. The Black-Scholes model was used to obtain the prices.
|
|
Calls
|
Puts
|
|
Strike
|
March
|
June
|
March
|
June
|
|
45
|
6.84
|
8.41
|
1.18
|
2.09
|
|
50
|
3.82
|
5.58
|
3.08
|
4.13
|
|
55
|
1.89
|
3.54
|
6.08
|
6.93
|
Assume that each transaction consists of one contract (100 options) unless otherwise indicated.
1. What is the intrinsic value of the June 55 put?
2. What is the intrinsic value of the March 55 call?
3. What is the time value of the June 50 put?
4. What is the time value of the March 45 call?
5. Consider a bull money spread using the March 45/50 calls.
a. How much will the spread cost?
b. What is the maximum profit on the spread?
c. What is the maximum loss on the spread?
d. What is the profit if the stock price at expiration is $47?
6. Consider a long straddle constructed using the June 50 options.
a. What will the straddle cost?
b. What are the two breakeven stock prices at expiration?
c. What is the profit if the stock price at expiration is at $64.75?
d. Suppose a put is added to the straddle. This overall transaction is called a strip. Determine the profit at expiration on the strip if the stock price at expiration is $36.
Problem 3
Consider a stock priced at $30. There are put and call options available at exercise prices of 30 and a time to expiration of six months. The calls are priced at $2.89 and the puts cost $2.15. There are no dividends on the stock and the options are European. Assume that all transactions consist of 100 shares or one contract (100 options).
1. Suppose the investor bought a call, and hold it to expiration.
a. What is the investor's profit, if the stock price at expiration is $37?
b. What is the breakeven stock price at expiration?
c. What is the maximum profit on the transaction?
d. What is the maximum profit that the writer of a call can make?
2. Suppose the investor constructed a covered call.
a. At expiration the stock price is $27. What is the investor's profit?
b. At expiration the stock price is $41. What is the investor's profit?
|
Discuss intra-familial dynamic created attachment process
: Discuss the intra-familial dynamic that created the attachment process. Elaborate on whether or not that process is disruptive, dysfunctional, et cetera, as well as why you feel that way.
|
|
Whose binary digits add up to an even number
: EASY PYTHON CODE!An evil number is a positive integer whose binary digits add up to an even number (the opposite of an evil number is an odious number, whose binary digits add up to an odd number).For example, 14 is odious:14 (base 10) = 1110 (binary..
|
|
Calculate the amounts of net income and retained earnings
: Effects of adjustments A bookkeeper prepared the year-end financial statements of Giftwrap, Inc. Calculate the amounts of net income and retained earnings after the preceding adjustments are recorded.
|
|
Describe how an enterprise would use 3g
: Describe how an enterprise would use 3G, 4G, WWAN, and WIAMX to improve business. Explain why they would use one (1) solution over the remaining three (3).
|
|
What is the breakeven stock price at expiration?
: What is the breakeven stock price at expiration?
|
|
Prepare a project plan for the unhcr
: Prepare a project plan for the United Nations High Commissioner for Refugees (UNHCR) Regional Office (Australia, New Zealand, Papua New Guinea and the Pacific) for a selected sub-project within the proposed Utopia Offshore Refugee Solution (Stage ..
|
|
What kinds of issues might arise when you are engaged
: What kinds of issues might arise when you are engaged in systemic assessment and diagnosis? How would you describe the process by which a counselor arrives at a diagnosis? What is the range of influences that must be considered?
|
|
Discussing two of the additional dba responsibilities
: Write a 500-1000 word paper using Word discussing two of the additional DBA responsibilities. Use at least two sources outside your text for this paper. Do not use Wikipedia. Use APA format for the paper, and be sure to cite all your sources using AP..
|
|
Explain the effect of this omission on net income reported
: Explain the effect of this omission on net income reported for October. Explain the effect of this omission on net income reported for November.
|