Which option has the lowest risk

Reference no: EM13266315

Gold is currently trading for about 1,300 per ounce. You are considering 3 ways of taking a short position on gold: (i) sell 100 ounces of gold short, (ii) take a short position in 1000 gold futures (September 2014), (iii) buy a futures put options on 1000 gold futures at K=1300 (September 2014).

(a) If you enter the above positions when gold equals 1,300, compare the dollars in profit from the three ways of betting against the price of gold if gold ends up at the following prices at time t: 1100, 1150, 1200, 1250, 1300, 1350, 1400, 1450, 1500, 1550 (Note: you should assume the price of one futures put option is $10).

(b) Draw a diagram showing the profits for each position for each price of gold.

Reference no: EM13266315

Questions Cloud

Writing about utilitarianism : Write two mail response to the story that show any kind of utilitarianism

What is the firms intrinsic value today : Hart Enterprises recently paid a dividend, D0, of $2.50. It expects to have nonconstant growth of 24% for 2 years followed by a constant rate of 7% thereafter. The firm's required return is 18%.

What is the stocks value : Ezzell Corporation issued perpetual preferred stock with a 12% annual dividend. The stock currently yields 10%, and its par value is $100.

Explain compound from its ir and proton nmr spectra : identify the following compound from its IR and proton NMR spectra. C5H6O: IR: 3300 (sharp), 2102, 1634 cm-1 NMR: ? 3.10 (1H, d, J = 1 Hz); ? 3.79 (3H, s); ? 4.52 (1H, doublet of doublets, J = 10 Hz and 1 Hz); ? 6.38 (1H, d, J = 10 Hz)

Which option has the lowest risk : If you enter the above positions when gold equals 1,300, compare the dollars in profit from the three ways of betting against the price of gold if gold ends up at the following prices at time t: 1100, 1150, 1200, 1250, 1300, 1350, 1400, 1450, 1500..

What is your total return for last year : You bought a share of 7.00 percent preferred stock for $99.68 last year. The market price for your stock is now $105.42.

Describe the characteristics of the series rc filter circuit : Describe the characteristics of the series RC filter circuit with the output across the capacitor component. Distinguish the pass and stop bands with reference to the cutoff frequency. Also, state what happens to the circuit complex impedance at t..

Explain what is hte mass in mgs of solute : what is hte mass in mgs of solute in 737 mL of a solution that contains 6.38 ppm of Pb(NO3)2 and please explain work

Find the charge on the capacitor as a function of time : Use electric circuit analysis techniques and Laplace methods to find the charge, q(t), on the capacitor as a function of time. The switch is closed at t=0 and the initial voltage V0 on the capacitor is 8 Volts.

User Account

All Pages