2. Supposing that you are a speculator and have the following information on hand: Strike = $30 Call = $5 / option Put = $ 3 / option Available to speculate $200,000 Probable market values at maturity: 20, 25, 30, 35, 40, 45. The market is expected to be on the rise. Size of contract: one share Required: a) Show the net results for each market value. b) What would be the maximum loss obtainable? c) What is the equilibrium market value?

2. Supposing that you are a speculator and have the following information on hand: Strike = $30 Call = $5 / option Put = $ 3 / option Available to speculate $200,000 Probable market values at maturity: 20, 25, 30, 35, 40, 45. The market is expected to be on the rise. Size of contract: one share Required: a) Show the net results for each market value. b) What would be the maximum loss obtainable? c) What is the equilibrium market value?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Hi, i need help with this question. The answer should be: potentially infinite but I dont understand how to get there. Please explain, thanks! Question: You establish a short strangle on a company using December call and put options. The call option has a strike price of $50 and the put option has a strike price of $45. The premium on the call option is $4.80 and the premium on the put option is $5.40. What is your maximum loss on this position?
A call option with the strike price of ₹ 1900 costs ₹ 2.90 and a put option with strike price of ₹ 1850 costs ₹ 3.50 per share of Larsen and Tubro Ltd. Create a long strangle from these options. (Give the Table) What will be the profit pattern if the spot rate of the stock on expiration is 1400, 1450, 1550, 1600, 1650, 1750, 1850, 1950 per stock? (Lot size is 1000) Interpret the results by explaining characteristics of the strangle strategy. Also draw the diagram with proper labelling.
Calculate the implied volatility on a security given the following information: a call option on the security has a premium of 3.5p, the security itself is trading at 50p, the call has an exercise price of 51p and has 120 days to maturity, and the riskless interest rate is 12 per cent. Calculate the implied volatility on a security given the following information: a call option on the security has a premium of 3.5p, the security itself is trading at 50p, the call has an exercise price of 51p and has 120 days to maturity, and the riskless interest rate is 12 per cent.
2) You enter into a ‘Call’ Option contract with a strike price of $20. This contract will expire in 31st of March 2021. On 31st of March, you realise that the underlying share price is $28 . a. Will you exercise this contract? Why or why not? b. Is this contract ‘In-the-Money’ or ‘Out-Of-the-Money’?
$80. The call premium is $6 and the put premium is $8. To keep thìngs simple, you can assume each contract allows the holder to buy or sell 13) You buy one call contract and also buy one put contract, both with the strike price of one (rather than the typical 100) share of the underlying stock. a. Compute the payoff to your option position if the stock price is $92 when the options expire. b. Compute the profit you made if the stock price is $92 when the options еxpire. c. What would happen to the value of your position if the volatility of returns for the underlying stock increases a day after you bought the call and the put? Please explain your answer for full credit. E FC MacBook Pro I A !!!
pls show full working
Consider a two-state outcome for the following problem: Winterhold Publishing House Current Stock Price $25.00 Exercise Price $27.00 Risk-free Rate 0.05 Share Price, High $30.00 Share Price, Low $20.00 Required: Using the data above, please find the hedge ratio. You currently own several shares of this company. The purchase puts according to the Hedge ratio to construct a non-random portfolio. Show the payoff for both outcomes, then solve for present value and the price of the put.
1.) The option is currently a.) In-the-money b.) At-the-money c.) Out-the-money 2.) In/At/Out- the money by _____ pesos. 3.) What is the Intrinsic Value
What is the Step by Step of solving L?
Your options trading strategy involves buying a European put with a strike price of ₺10 for ₺0.50 and aEuropean call with a strike price of ₺25 for ₺0.75 and selling a European put with a strike price of ₺15 for₺1.25 and a European call with a strike price of ₺20 for ₺1.50. The expiry date and the underlying asset isidentical for each of the four options. Draw the profit diagram for this strategy and indicate the maximumprofit/loss levels and break-even price levels. Show the details of your intermediate calculations.
Assume an interest rate of zero. A Call option and a Put option with the same exercise price, X = 100p are priced at 9p for the Call and 4p for the Put. What is the price of the synthetic share?
You sold a put contract on EDF stock at an option price of $.25 and an exercise price of $22.50. The option expires today when EDF stock is selling for $21.70 a share. Ignoring transactions costs and taxes, what is your total profit on this investment?

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