Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question
Suppose that a call option to buy a share for $200 costs $10. What is the delta of this option today if the current stock price is $180? (ignore time value of the option)
A. around 2
B. None of these answers are correct.
C. around 0.5
D. close to 0
E. close to 1
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- what does it mean when there is a outlier jump In time value as intrinsic value of the a call option decreases, is this just an outlier? or can this be explained. The call premium is 2.8arrow_forwardSuppose the current ABC stock price is $50 and an option trader speculates this price will fall below $50 soon. Which set of actions is the best strategy for him? buy the Stock and write a $50 call buy $40 call and short $60 call short $40 put and buy $60 put buy $50 call and buy $50 putarrow_forwardD3) Finance What is the probability that the put option is OTM at maturity if: the Stock is S = $195.00, no dividend is paid, the risk-free rate is r = 2.40%, the strike price is K = 209.00, the maturity is T = 23 months and the parameters are d1 = 0.2328 and d2 = -0.3175?arrow_forward
- Suppose you own a put option on Apple stock with a strike price of $150. Suppose it is the expiration date of the option and the current stock price of Apple is $75. What payoff will you receive from making an optimal exercise decision on your option? 1. -$75 2. $0 3. $75arrow_forwardA put option with an exercise price of $45 is currently selling for $5. The delta for the put is -0.4, and the stock is currently selling for $50. What is the elasticity of the put?arrow_forwardPlease show step by step work (not in excel): What is the call option premium given the following information? What would happen to the call price if the company initiated and paid a dividend before the expiration of the option? What would happen to the call premium if the expiration of the option expanded beyond the current 9 months? Stock price $36.00 Strike price $30.00 Volatility 16% Dividend Yield 0.00 Time 0.75 Riskfree Rate 2.70%arrow_forward
- Nonearrow_forwardShort straddle is an option strategy that involves simultaneously selling a put and a call on the same stock with the same strike price, which is equal to the current stock price. Profit or Loss What is the purpose of this strategy? $400 SO 30 To profit from a large price increase SHORT STRADDLE A To profit from large price deviations from the current price D) To profit from a large price decrease 40 B To profit from the lack of price deviations from the current price 50 Stock Price at Expiration :arrow_forwardSuppose that the gamma of a delta-neutral portfolio of options on an asset is +11,000. What would be the impact on the portfolio of a sudden jump of +3 or -3 in the price of the asset (without any time passing). +49,500 and -20,000 +49,500 and +20,000 -49,500 and +49,500 +49,500 and +49,500 -20,000 and +20,000 EO O O O Oarrow_forward
- If the current price of a stock is $30, and you believe that price changes follow a random walk, what is your best estimate for the expected price tomorrow. A) 0 B) 25 C) 30 D) 35 E) 40arrow_forward3 You are given the following information on some company's stock, as well as the risk- free asset. Use it to calculate the price of the call option written on that stock, as well as the price of the put option. (HINT: You should use the Black-Scholes formula!) (Do not round intermediate calculations and round your final answers to 2 decimal places, e.g., 32.16.) Today's stock - $77 price = Exercise price = $75 Risk-free rate = Option maturity = 5 months Standard deviation of annual stock returns Call price Put price $ $ 3.4% per year, compounded continuously = 59% per year 3.61 x 0.56 X 1arrow_forwardPlease don't provide handwritten solution ....arrow_forward
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