The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, and you are convinced it is going to break far out of that range in the next three months. You do not know whether it will go up or down, however. The current price of the stock is $100 per share, the price of a three-month call option with an exercise price of $100 is $10, and a put with the same expiration date and exercise price costs $7. a. What would be a simple options strategy to exploit your conviction about the stock price's future movements? Sell both a put option and a call option on the stock. Buy both a put option and a call option on the stock. Buy a put option and sell a call option on the stock. Sell a put option and buy a call option on the stock. b. How far would the price have to move in either direction for you to make a profit on your initial investment? Stock price must move up above $ | for you to make a profit. or move down below $

The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past month, but you are convinced it is going to break far out of that range in the next 6 months. You do not know whether it will go up or down, however. The current price of the stock is $85 per share, and the price of a 6 month call option at an exercise price of $85 is $8.00. Required: a. If the semiannual risk-free interest rate is 4%, what must be the price of a 6-month put option on P.U.T.T. stock at an exercise price of $85? (The stock pays no dividends.) b. What would be a simple options strategy to exploit your conviction about the stock price's future movements? How far would it have to move in either direction for you to make a profit on your initial investment? Complete this question by entering your answers in the tabs below. Required A Required B If the semiannual risk-free interest rate is 4%, what must be the price of a 6-month put option on P.U.T.T. stock at an exercise price…

A.K. Scott’s stock is selling for $37 a share. A 3-month call on this stock with a strike price of $38 is priced at $2. Risk-free assets are currently returning 0.28 percent per month. a) What should be the price of a 3-month put option on this stock with a strike price of $38? b) Which of the two options is currently in the money and does that accord with your conclusions about their relative prices?

The common stock of the XYZ Co. has been trading in a narrow range around $40 per share for months, and you believe it is going to stay in that range for the next 3 months. The price of a 3-month put option with an exercise price of $40 is $3, and a call with the same expiration date and exercise price sells for $4. How can you create a position involving a put, a call, and riskless lending that would have the same payoff structure as the stock at expiration? O Buy the call, sell the put; lend the present value of $40. O Sell the call, buy the put; lend the present value of $40. O Buy the call, sell the put; borrow the present value of $40. O Sell the call, buy the put; borrow the present value of $40.

Nikil

Radubhai

Stanton Company stock is trading for 50 in a two‑time period environment, so that each relevant time period is 6 months. The stock might increase by exactly 20% in just one period or perhaps in both periods. Of course, the stock might not increase in either period. If the stock price does not increase in a given period, it will decline by 16.67 percent in that particular period. One-year options with an exercise price equal to 60 are trading on this stock. The annual riskless rate of return equals 0.    a.  What is the value of a put in this environment?    b.  What is the probability (risk-neutral probability) implied in this framework that the Stanton Company stock price will exceed 40 when options expire?

Now suppose the stock price of Oceanic Industries throughout the four quarters in 2019 actually looks as follows: 100 90 80 70 60 50 40 30 20 10 0 Oceanic Industries Stock Price (2019) ?

A share of stock with a beta of 0.70 now sells for $45. Investors expect the stock to pay a year-end dividend of $4. The T-bill rate is 5%, and the market risk premium is 8%. If the stock is perceived to be fairly priced today, what must be investors’ expectation of the price of the stock at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Momo, a fast-growing company, will make an earnings announcement three months from now. But you do not know whether it will be positive or negative (i.e., the stock price will go up or down). The current price of the stock is $30 per share. A three-month call with an exercise price of $30 costs $5. A put with the same exercise price and expiration date costs $5. a. What would be a simple options strategy to bet on the stock price volatility?