An investor is considering purchasing Apple’s stock for $150 per share. The investor is optimistic (bullish) that the price will increase to $155 by August 19 (appx one month) and decides to buy (long) a call option for $3.95 per share.   What is the breakeven value of this potential investment?

Learn Corp. (Ticker: LC), an education technology company, is considered to be one of the least risky companies in the education sector. Investors trade call options for Learn Corp., whose stock is currently trading at $18.00. Suppose you are interested in buying a call option with a strike price of $25.20 that expires in 6 months. (Assume that you get the option for free!) Based on speculations and probability analysis, you compute and collect the following information for your price analysis of the option: • For LC’s options, time until expiration (t) is taken as 0.50 year (6 months/12 months). • LC’s stock could go up by a factor of 1.50 (u). • LC’s stock could decline by a factor of 0.60 (d).   At this time, LC’s stock price is    , and if you exercised the option, your payoff would be    . Therefore, if the option is out-of-the-money, you    exercise the option.   Calculate the ending stock price of Learn Corp. for both possible outcomes and the payoff in both…

Suppose that you plan to invest in stock A, because you believe that stock A will appreciate in the next 6 months. The stock current price is $100, and a call option on stock A expiring in 6 months has an exercise price of $100 selling at $15 per option. And you have $7500 in hand to invest the following three strategies: A: Invest entirely in stock A. B: Invest entirely in call option on stock A. C: Buy call options the amount of calls is same as the number of shares we purchase in strategy A, and invest the remaining money in T-bills at interest rate whose annual interest rate is 10%. Suppose that the possible stock price are $90, $100, $110, and $120. (a) At expiration (after 6 months), compute the rates of return for each strategy given different possible stock prices. We don't consider the premium we’ve paid for holding call options in this case. (b) Given different stock price at expiration, which strategy would you like to choose? For example, if the stock price is $90, which…

You want to purchase IBM stock at $130 from your broker using as little of your own money as possible. If initial margin is 50% and you have $19, 600to invest, how many shares can you buy?

The stock price of Google is $589. You have $10,000 saved in a savings account. The monthly interest rate is 0.2%.   You think the stock price will go down soon, and want to trade 20 shares. What should you do? Enter 20 for buying 20 shares (on margin if necessary), or -20 for selling or short-selling 20 shares.   If the initial margin is 50%, what is the minimum additional dollar amount that you have to deposit in your brokerage account?   What is your initial percentage margin (entered as a decimal number) once you've completed the deposit calculated in part 2?   Two months later, the stock price is $609. Google paid a dividend of $7 per share just before the two months were over. What is your percentage margin (entered as a decimal number)?

You spend many sleepless nights building cash flow models of Facebook Inc. (FB) and are convinced they are undervalued. The current spot price of FB is $204/share. You predict that in 6 months they will reach $240/share. Assume a 2% interest rate per annum. a) You buy a January 2020 call option (t=6 months) for $5.20/share with a strike price of $230/share. Draw a payoff and profit diagram of this position. b) Under what circumstances will you make money?

You own 1,000 shares of Apple. Apple has a monthly beta of 1.28 to the S&P500 Index. The current 3-month e-mini S&P 500 Future is trading at 4,038.5; the contract unit is $50 * S&P 500 index value (so each contract is worth $50*4038.5). You have a negative view about the market and think Apple price would go down; you want to hedge that exposure. 1. How many e-mini S&P 500 Future do you need to hedge your Apple exposure? 2. Do you short/long these future contracts?

In the coming week, the outcomes from a class action lawsuit will result in a significant shock to the price of "M", which may be positive or negative. Thus, you decide to follow a Straddle strategy using a call option and a put option with strike 105, which have premiums of 16 and 9, respectively. If the stock price is 87 today, what is the total profit of your portfolio? Keep in mind that each call option contract controls 100 shares. Please round your answer to the nearest three decimals.