An option is trading at $3.45. If it has a delta of .78, what would the price of the option be if the underlying increases by $.75? A. What would the price of the option be if the underlying decreases by $.55? B. What makes this a call option? C. With a delta of .78, is this option ITM, ATM or OTM and how?

1. Suppose you have the following information concerning a particular options.Stock price, S = RM 21Exercise price, K = RM 20Interest rate, r = 0.08Maturity, T = 180 days = 0.5Standard deviation, � = 0.5 The Call option value is 3.77. and put option value is 1.99 Suppose a European put options has a price higher than that dictated by the putcall parity. a. Outline the appropriate arbitrage strategy and graphically prove that the arbitrage is riskless. Note: Use the call and put options prices above)b. Name the options/stock strategy used to proof the put-call parity. explainc. What would be the extent of your profit in (a) depend on? explain

A put option has a strike price of MYR3.00/SGD. If the option is exercised before maturity, what price in the followings would maximize gain? a. MYR3.00/SGD. b. MYR2.90/SGD. c. MYR3.05/SGD. d. MYR2.95/SGD.

Suppose you want to price an American style put option for a stock being traded on theDryfontein Stock Exchange having the following parameters: s = 18, t = 0.25, K = 20, σ =0.2 and r = 0.07. Using n = 5, calculate the value of V2(2). Provide all necessary details.

Label the following for this diagram: a. Name of options payoff b. Identify whether positive or negative premium c. Identify breakeven point d. What is the profit or loss when stock price is S60 at maturity e. Suppose you have this options position, should you exercise your right (if any) assuming that the stock price is $60 at maturity? Option Payoffs and Profits Long put $40 $20 $0 Option Payoff Option Profit Exerche Price $20 S40 $20 $40 S60 $80. Stock Price At Maturity Payoff and Profit

You buy a put and a call on a stock that expire at time T. They are European options. Both the put and the call have an exercise price of $50. Plot the cash flows at the time of expiry. This strategy has a name. What is it?

Tick all those statements on options that are correct (and don't tick those statements that are incorrect). B a. The Black-Scholes formula is based on the assumption that the share price follows a geometric Brownian motion. b. If interest is compounded continuously then the put-call parity formula is P+ S(0) = C + Ker where T is the expiry time. An American put option should never be exercised before the expiry time. d. In general the equation S(T) +(K-S(T)) = (S(T)-K)+ +K is valid. e. The put-call parity formula necessarily requires the assumption that the share price follows a geometric Brownain motion. C.

Consider the model of Black and Scholes. Consider the cash=or-nothing put option V (T) = 1{S(T)<= K} It pays out one unit of cash if the spot is below the strike at maturity. Evaluate the price of the option.

Multiple Choices: 1. What happens to a premium for a call option if the underlying futures price increases (all else equal)? (i) The premium increases. (ii) The premiums stays the same. (iii) The premium decreases. (iv) There is no relationship between the premium and futures prices.   2.  What happens to a premium for a put option if volatility in the underlying futures contract decreases (all else equal)? (i) The premium increases. (ii) The premiums stays the same. (iii) The premium decreases. (iv) There is no relationship between the premium and volatility.   3. Which of the following is false about the seller an option? (i) The seller is required to have a margin account (ii) The seller has an obligation, not a right (iii) The seller always wants the futures price to rise (iv) The seller can choose to offset the option

If the stock price increases, the price of a put option on that stock ________ and that of a call option _________.     decreases, increases     decreases, decreases     increases, decreases     increases, increases