User Account

All Pages

What is the maximum potential loss for the trader

Assignment Help Finance Basics
Reference no: EM132652839

The stock price of Lotus is currently $220 and the call option with strike price of $220 is $10. A trader purchases 100 shares of Lotus stock and short 1 contract of call options with strike price of $220. As a financial analyst at Citibank, you want to answers the following two questions:

a. What is the maximum potential loss for the trader?

b. When the stock price is $240 and the call is exercised, what is the trader's net profit?

Please choose all correct answers. Please also note that each incorrect answer will reduce the score by 10%.

1. When the stock price is $240 and the call is exercised, the trader's net profit is $1000

2. The maximum potential loss for the trader is $21000

3. When the stock price is $240 and the call is exercised, the trader's net profit is $1100

4. The maximum potential loss for the trader is $22000

5. When the stock price is $240 and the call is exercised, the trader's net profit is $1300

6. The maximum potential loss for the trader is $23000

7. When the stock price is $240 and the call is exercised, the trader's net profit is $1200

8. The maximum potential loss for the trader is $20,000

Reference no: EM132652839

Questions Cloud

Calculate the total cost of ipo : Calculate the total cost of IPO. That is, what is the sum of direct and indirect cost?
What is the annual carrying cost for the? zen-zens : Tinnendo, Inc. believes it will sell 4 million? zen-zens, an electronic? game, this coming year. Note that this figure is for annual sales. The inventory manage
Different ways to estimate the value of a company : Why are there so many different ways to estimate the value of a company? When is each model appropriate?
Find dollar value of Cost of Goods Sold for the month of May : Sales were 440 units at $20. Using the FIFO method, find dollar value of Cost of Goods Sold for the month of May
What is the maximum potential loss for the trader : The stock price of Lotus is currently $220 and the call option with strike price of $220 is $10. A trader purchases 100 shares of Lotus stock and short 1 contra
What the commercial banks were supposed to do : According to the movie "The Big Short", answer the following questions:
What is the average accounts payable for app : What is the average accounts payable for APP? Round your answer to the nearest dollar.
Journalize the january transactions : On January 1, 2014, the ledger of Shumway Company contains the following liability accounts. Journalize the January transactions
How long-term investment management processes operate : How long-term investment management processes operate and how certain theorists establish structures for rates of return on investment.

Reviews

Write a Review

Finance Basics Questions & Answers

  What happens to the expected return on the stock

The common stock and debt of Northern Sludge are valued at $60 million and $40 million, respectively. Investors currently require a return of 17.0%.

  What is the payback period

The LoveLivingInParadise Company wants to calculate how long it will take to recover their initial investment on a project. The end-of-year cash flows are estim

  Bootstrapping to fund a business venture

Bootstrapping allows founders to have more control and give up less of their company to investors. Yet continually living on limited resources can take its toll on entrepreneurs. Examine the pros and cons of both working full time and taking a par..

  Apply quantitative techniques to complex financial problems

Analyze financial statements and qualitative data of profit maximizing firms for corporate decision-making - Apply quantitative techniques to complex financial problems.

  How much money must he contribute to his retirement fund

Complex annuity and future value) Milhouse, 22, is about to begin his career as a rocket scientist for a NASA contractor. Being a rocket scientist.

  Estimate energetic’s cost of retained earnings

Estimate Energetic's cost of retained earnings using the bond-plus-risk-premium approach.

  Advantage of the cash discount offer

Would you recommend borrowing from a bank at an 18 percent annual interest rate to take advantage of the cash discount offer? Explain your answer.

  What is liz profit or loss in us dollars

On July 15, 2XX6, Liz converts 535,000 U.S. dollars to Japanese yen in the spot foreign exchange market (¥108.52/$)

  Scenario analysis and sensitivity analysis

What is the difference between scenario analysis and sensitivity analysis? How can you use each during the capital budgeting process?

  Shifting of the business cycle

Describe the reaction of cyclical and defensive industries to shifting of the business cycle.

  Proportion of all american adult office workers

What is the standard error for the estimate of the proportion of all American adult office workers that have worn a Halloween costume to the?office?

  What are the irr andeturns to the developer and the fund

A developer puts in 5% equity and a fund puts in 95% of the equity for a development deal. Cash flow is to be distributed with the following order of priorities

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd