Suppose you had just gone long (purchased) on lot of Syarikat XYZ stock at a price of RM 15.00 each, for a total investment of RM 15,000. You believe this stock has long term potential but wish to protect yourself from any short-term downside movement in price. Suppose 3-month, at-the-money put options on Syarikat XYZ stocks are being quoted at RM 0.15 or 15 sen each or RM 150 per lot (RM 0.15 x 1,000). a. What would be the appropriate options strategy to hedge the long stock position? b. Show (in a table) the payoff to the combined position for a given range of stocks prices at options maturity in 3-months. c. Draw the payoff profile of combined positions.
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- Suppose you had just gone long (purchased) on lot of Syarikat XYZ stock at a price of RM 15.00 each, for a total investment of RM 15,000. You believe this stock has long term potential but wish to protect yourself from any short-term downside movement in price. Suppose 3-month, at-the-money put options on Syarikat XYZ stocks are being quoted at RM 0.15 or 15 sen each or RM 150 per lot (RM 0.15 x 1,000).a. What would be the appropriate options strategy to hedge the long stockposition? b. Show (in a table) the payoff to the combined position for a given range ofstocks prices at options maturity in 3-months. c. Draw the payoff profile of combined positions.1. Suppose you had just gone long (purchased) on lot of Syarikat XYZ stock at a price of RM 15.00 each, for a total investment of RM 15,000. You believe this stock has long term potential but wish to protect yourself from any short-term downside movement in price. Suppose 3-month, at-the-money put options on Syarikat XYZ stocks are being quoted at RM 0.15 or 15 sen each or RM 150 per lot (RM 0.15 x 1,000). a. What would be the appropriate options strategy to hedge the long stock position? explainb. Show (in a table) the payoff to the combined position for a given range of stocks prices at options maturity in 3-months. explainc. Draw the payoff profile of combined positions. explainSuppose an investor sells 100 stocks by short selling for 6 months, the stock price is 30 yuan, and the annual interest rate of 6 months is fixed at 3%. How can I use forward contracts to avoid risks? What is the execution price? Please analyze if the stock price rises to 35 yuan or falls to 25 yuan after 6 months of hedging, what are the losses of this investor?
- A.K. Scott’s stock is selling for $37 a share. A 3-month call on this stock with a strike price of $38 is priced at $2. Risk-free assets are currently returning 0.28 percent per month. a) What should be the price of a 3-month put option on this stock with a strike price of $38? b) Which of the two options is currently in the money and does that accord with your conclusions about their relative prices?Suppose you had just gone long 10 lot of Cerah Bhd stock at a price of RM 20.00 each, for a total investment of RM 20,000. 1 lot = 100 shares. You wish to protect yourself from any short term downside movement in price. Suppose 3-month, at-the-money put and call options on Cerah Bhd stock are being quoted at RM 0.20.)i) Identify the risk exposure you have in stock investment.)ii) (Outline the appropriate strategy to hedge your current position.) iii) (What is your risk profile for the selected strategy?) iv) (Graph the position of your strategy (label all axes/ points)) v) (Calculate the maximum possible loss, maximum profit and break-even point?))Suppose that you are willing to pay $450.33 today for a share of stock which you expect to sell at the end of one year for $500.25. If you require an annual rate of return of 15 percent, what should be the estimate of the amount of the annual dividend which you expect to receive by the end of Year 1 prior to the sale of the stock? Assume that the estimated return equals the required rate of return. Options: a. $17.63 b. $1.60 c. $10.99 d. $19.25 e. $3.60
- Your broker has recommended that you purchase stock in Alacan, Inc. She estimates that the 1-year target price is $76.00, and Alacan consistently pays an annual dividend of $17.00. Analysts estimate that the stock has a beta of 0.91. The current risk-free rate is 2.70% and the market risk premium (RM - RF) is 9.50%. Assuming that CAPM holds, what is the intrinsic value of this stock?At time t=0 Mr. Anderson sets up a riskless portfolio by taking a position in an option and in the underlying asset. Explain what Mr. Anderson needs to do at time t=1 to keep his portfolio risk neutral and why. A stock price is currently $100 and at the end of four months it will be ST . A derivative written on this stock pays off expST1/3 in four months. Given that u = 1.15, d = 0.87, and that the risk-free interest rate is 10% p.a. (continuously compounded), answer the following questions using a one-period binomial model (show all the details of your calculations and display the results with four decimal places): Calculate the value of ∆ Calculate the current value of the derivative.The common stock of Triangular File Company is selling at $91. A 13-week call option written on Triangular File's stock is selling for $9. The call's exercise price is $101. The risk-free interest rate is 8% per year. a. Suppose that puts on Triangular stock are not traded, but you want to buy one. Which combination will produce the same results? Buy call, invest PV(EX), sell stock short Sell call, invest PV(EX), sell stock short Buy call, lend PV(EX), buy stock Sell call, lend PV(EX), buy stock b. Suppose that puts are traded. What should a 13-week put with an exercise price of $101 sell for? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Put option price
- Your broker has recommended that you purchase stock in ZZZ-Best, Inc. She estimates that the 1-year target price is $70, and ZZZ-Best consistently pays an annual dividend of $8. Based on your analysis, you estimate that the stock has a required rate of 18%. What is the intrinsic value of this stock? O $64.43 O $68.73 O $67.35 O $61.86 O $66.10XYZ Corp. will pay a $2 per share dividend in 2 months. Its stock price currently is $72 per share. A call option on XYZ has an exercise price of $65 and 3-month time to expiration. The risk-free interest rate is 0.3% per month, and the stock's volatility (standard deviation) = 12% per month. Find the pseudo-American option value. (Hint: Try defining one "period" as a month, rather than as a year.) (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Pseudo-American option valueAstock currently trades at $100. In one month its price will either be $125, $100, or $75. 1 sell you a call option on this stock, struck at $95, for $11. | hedge my exposure by purchasing A shares, borrowing 1004 - 11 in order to fund the purchase. The simple rate of interest is 12%. (2) What will my profit/loss be in one month? {b) Is it possible for me to completely hedge my exposure? Explain.