A trader writes 5 naked put option contractswith each contract being on 100 shares. Theoption price is $10, the time to maturity is 6months, and the strike price is $64. (a) Whatis the margin requirement if the stock price is$58? (b) How would the answer to (a)change if the rules for index options applied?(c) How would the answer to (a) change if thestock price were $70? (d) How would theanswer to (a) change if the trader is buyinginstead of selling the options?

Calculation of maximum lossMaximum loss = (Strike Price - Stock Price) * No. of shares * Contract…

Answered: with each contract being on 100 shares.…

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

You purchase one put option contract on AMD with an exercise price of $100 for a premium of $3.7. You hold the option until the expiration date, when AMD sells for $108 per share. One contract is on 100 shares of the underlying stock. Compute your profit. Your Answer: Answer
What if the value of the put options? (Use two decimal places)
A put with a strike price of $50 was sold at $11 when the price of the stock was $48. What was the time value of the put at expiration?
$80. The call premium is $6 and the put premium is $8. To keep thìngs simple, you can assume each contract allows the holder to buy or sell 13) You buy one call contract and also buy one put contract, both with the strike price of one (rather than the typical 100) share of the underlying stock. a. Compute the payoff to your option position if the stock price is $92 when the options expire. b. Compute the profit you made if the stock price is $92 when the options еxpire. c. What would happen to the value of your position if the volatility of returns for the underlying stock increases a day after you bought the call and the put? Please explain your answer for full credit. E FC MacBook Pro I A !!!
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 $_----
Consider a U.S. exchange-traded call option contract to buy 100 shares with a strike price of $37 and maturity in six months. Explain how the terms of the option contract would be revised if the specified change involving the underlying stock were to occur. What would be the revised strike price contract if there were a 5-for 1 stock split? Report your answer rounded to dollars and cents. Answer:
A stock is currently priced at $63 and has an annual standard deviation of 43 percent. The dividend yield of the stock is 5.2 percent, and the risk - free rate is 5.2 percent. What is the value of a call option on the stock with a strike price of $60 and 48 days to expiration? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Call option $
IBM stock is currently trading at $100 per share. An investor purchases one Put option contra on IBM with a $100 strike and at a price of $3.00 per contract. Each options contract represer an interest in 100 underlying shares of stock. For each of the following scenarios determine i 7. the option is in the money, at the money, or out of the money. Show your work. A. When the option expires, IBM is trading at $98 B. When the option expires, IBM is trading at $90 C. When the option expires, IBM is trading at $97
You buy 1 put contract with a strike price of $60 on a stock which you own 100 shares. What are the expiration total values for this position (100 stock shares plus 1 put contract) for prices of $50 and $60 if the put premium is $1.80?
Which of the following call options on XYZ stock is most valuable? 1. Strike price = $ 40, 3 months to expiration 2. Strike price = $ 40, 3 months to expiration 3. Strike price = $ 50, 6 months to expiration 4. Strike price = $ 50, 6 months to expiration
1.) The option is currently a.) In-the-money b.) At-the-money c.) Out-the-money 2.) In/At/Out- the money by _____ pesos. 3.) What is the Intrinsic Value
A stock is currently priced at $61 and has an annual standard deviation of 41 percent. The dividend yield of the stock is 2.8 percent, and the risk-free rate is 4.8 percent. What is the value of a call option on the stock with a strike price of $58 and 52 days to expiration? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Call option $

SEE MORE QUESTIONS

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

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

with each contract being on 100 shares. The option price is $10, the time to maturity is 6 months, and the strike price is $64. (a) What is the margin requirement if the stock price is $582 (b) How would the answer to (a)