Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question
You own one ABC October 50 put. ABC stock is now trading at $53 per share. Which statement is true?
A. Your option has been assigned.
B. Your option has no intrinsic value.
C. Your option has no time value.
D. Your option has no open interest.
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- You bought a $50 strike call option on a stock XYZ for $8.20 and then sold/wrote a $65 call option for $4.35 If the stock closes at $49 on expiration day, how much did you lose at expiration?arrow_forwardA collar is established by buying a share of stock for $54, buying a 6-month put option with exercise price $47, and writing a 6-month call option with exercise price $61. On the basis of the volatility of the stock, you calculate that for a strike price of $47 and expiration of 6 months, N(d1) = 0.7298, whereas for the exercise price of $61, N(d1) = 0.6374. Required: What will be the gain or loss on the collar if the stock price increases by $1? What happens to the delta of the portfolio if the stock price becomes very large? What happens to the delta of the portfolio if the stock price becomes very small?arrow_forwardA stock is currently priced at 43.75 when options are about to expire. What is the net profit of a CALL option with a strike price of 45 for the BUYER of the option if the premium paid was 1.75? (per share) Group of answer choices 1.75 0.00 -2.25 -1.75 45.00arrow_forward
- You buy a share of stock, write a 1-year call option with X= $85, and buy a 1-year put option with X- $85. Your net outlay to establish the entire portfolio is $83.3. The stock pays no dividends. a. What is the payoff of your portfolio? Payoff b. What must be the risk-free interest rate? (Round your answer to 2 decimal places.) Risk-free rate %arrow_forwardA stock priced at $50 has two possible outcomes, either increases to $60 or decreases to $42. If the stock goes up, the payoff of the stock's call option = S5. But, if the stock price declines to $42, the calls will expire worthless. Given these two possible outcomes, what is the Hedge Ratio of the Call option? Round your answer to two decimals. The listed correct answer was 0.28. I could not find a way to get this.arrow_forwardQuestion 5: Suppose that a March call option to buy a share for $50 costs $2.50 and is held until March. Under what circumstances will the holder of the option make a profit? Under what circumstances will the option be exercised? Draw a diagram showing how the profit on a long position in the option depends on the stock price at the maturity of the option.Plz explain itarrow_forward
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