Suppose you write 32 put option contracts with a $60 strike. The premium is $2.40. Evaluate your potential gains and losses at option expiration for stock prices of $50, $60, and $70. Note: Input all amounts as positive values. At stock price of $50, the At stock price of $60, the At stock price of $70, the

Suppose you write 32 put option contracts with a $60 strike. The premium is $2.40. Evaluate your potential gains and losses at option expiration for stock prices of $50, $60, and $70. Note: Input all amounts as positive values. At stock price of $50, the At stock price of $60, the At stock price of $70, the

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

See similar textbooks

Similar questions

Suppose you combine two option contracts as follows. You buy a call option on a stock with an exercise price of $65 for a premium of 9$. At the same time you sell a call option on the same stock with an exercise price of $75 for a premium of $4. Both calls expire at the same time. The stock sells currently at $72. Answer the following questions about this investment strategy: 1. Determinethevalueatexpiration(thepayoffs)andtheprofitunderthefollowingoutcomes: a. The price of the stock at expiration is $78b. The price of the stock at expiration is $69c. Thepriceofthestockatexpirationis$62 2. Determine the following:a. The maximum profit b. The maximum loss 3. Determinethebreakevenstockpriceatexpiration(thestockpriceforwhichyourstrategydeliversno profit and no loss). 4. Depictthepayoffandprofitdiagramsofyourinvestmentstrategy.
Only typing. ...all ques
Give typing answer with explanation and conclusion You are considering purchasing a put on a stock with a current price of $33. The exercise price is $35, and the price of the corresponding call option is $3.25. According to the put-call parity theorem, if the risk-free rate of interest is 4% and there are 90 days until expiration, the value of the put should be:
Only typing. .... . A strip is a variation of a straddle involving two puts and one call. Construct a short strip using the August 170 options. The price of the call option is $8.10 and the price of the put option is $6.75. Hold the position until the options expire. Determine the profits and graph the results. Identify the breakeven stock prices at expiration and the minimum profit.
Suppose you purchase 20 call contracts on SAMSONG Co. stock. The strike price is $120, and the premium is $8. If the stock is selling for $140, $128, $120 per share at expiration, what are your call options worth? What is your net profit?
- You purchased 250 shares of common stock on margin for $28 per share. The initial margin is 70% and the stock pays no dividend but has a trading cost of $0.1 per share. Your rate of return would be if you sell the stock at $36 per share. Ignore interest on margin.
Suppose you buy a stock at $70 together with a put option with a strike of $70 and a premium of $5. Your minimum payoff at expiration is $_----
1. For each of the following cases, calculate (i) the cashflow paid or received today on entering the position, (ii) the gross payoff at expiry, and (iii) the net payoff from your option trading All options are European style and cover 100 shares in the underlying asset. a) You enter a long call option with a strike price of $6 and premium of $2.30. At expiry, the share price is $7.80. b) You enter a long call option with a strike price of $9 and premium of $0.80. At expiry, the share price is $7.90. c) You enter a short call option with an exercise price of $5 and premium of $0.70. The share price at expiry is $5.40. d) You enter a short call option with an exercise price of $5 and premium of $0.70. The share price at expiry is $4.90. e) You buy a long - put option with a strike price of $10 for a premium of $ 1.20. At expiry, the share price is $8.50. f) You write (i. e., short) a put option with strike price $7 for a premium of $0.60. At expiry, the share price is $5.
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. Required: What is the payoff of your portfolio? What must be the risk-free interest rate? The stock pays no dividends. Note: Round your answer to 2 decimal places.
BUG’s stock price is $53 and its put price is $4.50 for a strike price of $55. Then this put option’s intrinsic value is:
a one year call option on a stock with a price of $40 costs $1; a one-year put option on the stock with a strike price of $35 costs $4. suppose that a trader buys two cal options and one put option. the breakeven stock price above which the trader makes a profit is a) $42 b) $45 c) $44 d) $43
You have purchased a put option on ABC common stock for $2 per contract. The option has an exercise price of $55. What is your net profit on this option if stock price is $43 at expiration?

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS