Which is correct and why is it correct
Homework Answers
In bear put spread, one buys put of higher strike and sells put of lower strike
So if both options are out of the money then profit=difference in premium=Premium received-Premium paid=Premium for lower strike-Premium for higher strike=P1-P2
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Which is correct and why is it correct
The profit from a put bear spread strategy...
You are attempting to formulate an investment strategy. In particular, you short a put option with strike price X1 equal...
You are attempting to formulate an investment strategy. In particular, you short a put option with strike price X1 equals to $95 and you long another put option with strike price X2 equals to $115. Both put options have the same underlying stock and will expire at time T. (a) Plot the payoff structure of this investment strategy as a function of ST, which stands for the price of the underlying stock at maturity. The X-axis for St and the...
10. Use the options prices for Spotify in the EXCEL FILE to create a bear spread...
10. Use the options prices for Spotify in the EXCEL FILE to create a bear spread using the puts with strike prices 170 and 175. Be sure to use the appropriate bid and ask prices. a. What will be your cash flow per share when you set up the position? Show all cash flows: inflows, outflows, and net flow. Inflow Outflow Net Flow b. The maximum profit on the put bear spread is c. The minimum profit on the put...
Three-month European put options with strike prices of $50, $55, and $60 cost $2, $4, and...
Three-month European put options with strike prices of $50, $55, and $60 cost $2, $4, and $7, respectively. 1) How can one create a butterfly spread using these options? 2) Please draw the payoff and profit diagrams of this butterfly strategy. 3) What are the maximum gain and maximum loss of the butterfly spread created using these put options? 4) For which two values of ST does the holder of the butterfly spread break even (with a profit of zero),...
mich of the following strategy can make profit from underlying price drop? A. Buying a put...
mich of the following strategy can make profit from underlying price drop? A. Buying a put B. Selling a put C. Protective put D. Bullish spread E. None above 7. Which of the following is the riskiest single-option transaction? A. Writing a call B. Buying a put C. Writing a put D. Buying a call E. Riskiness of the all the strategies above is the same 8. Which of the following combinations have similarly shaped profit/loss diagrams? A. Covered Call...
When is it appropriate for an investor to purchase a butterfly spread? Suppose three put options on a stock have the same expiration date and strike prices of $65, $70, and $75. The market prices are...
When is it appropriate for an investor to purchase a butterfly spread? Suppose three put options on a stock have the same expiration date and strike prices of $65, $70, and $75. The market prices are $3.50, $6, and $7.50, respectively. Explain how a butterfly spread can be created. Construct a table showing the profit from the strategy. For what range of stock prices would the butterfly spread lead to a loss?
When is it appropriate for an investor to...
. Dividing Money There is a $10 available prize, and Players 1,2 must try to agree...
. Dividing Money There is a $10 available prize, and Players 1,2 must try to agree on a di- vision, via the following game: Player 1 writes down a proposed offer x1 to Player 2 (i.e proposes that he, P1, keep 10-x of the prize, giving the remaining xi to Player 2). Player 2 simultaneously writes down a demand for himself, x2: If x1 2x2 (P1's offer weakly exceeds P2's demand), the money is divided according to Pl's suggested split...
our Section: 1. Which of the following trading strategy prefers the options to be out-of-the-money! A....
our Section: 1. Which of the following trading strategy prefers the options to be out-of-the-money! A. Selling Put B. Selling Call C. Covered Call D. All above E. None above 2. Which of the following option strategy requires the SAME exercise price of options? A. Bearish spread B. Bullish spread C. Straddle D. All above E. None above 3. An European put option gives its holder the right to : A. buy the underlying asset at the exercise price on...
Profit or Loss from a futures risk management strategy: I. Is the difference between the current...
Profit or Loss from a futures risk management strategy: I. Is the difference between the current price of the futures contract and its future price; II. Is used to offset the profit or loss of the previous market transaction; III. Is highly undesirable because does not allow to hedge the spot price of an underlying asset. Select one: O a. Only I is correct O b. Only Il is correct o c. Only III is correct O d. Only I...
3. Dividing Money There is a $10 available prize, and Players 1,2 must try to agree...
3. Dividing Money There is a $10 available prize, and Players 1,2 must try to agree on a di- vision, via the following game: Player 1 writes down a proposed offer x1 to Player 2 (i.e., proposes that he, P1, keep 10-xi of the prize, giving the remaining xi to Player 2). Player 2 simultaneously writes down a demand for himself, x2: If xi >x2 (Pl's offer weakly exceeds P2's demand), the money s divided according to P1's suggested split...
Two random samples of student loans were collected: one from students at for-profit schools and another...
Two random samples of student loans were collected: one from students at for-profit schools and another from students at non-profit schools. The accompanying data show the sample sizes and the number of loans in each sample that defaulted. Complete parts a through c. Click the icon to view the loan data. a. Perform a hypothesis test using a = 0.10 to determine if the proportion of for-profit loans that default is larger than the proportion of loans for nonprofit schools...
10. Use the options prices for Spotify in the EXCEL FILE to create a bear spread using the puts with strike prices 170 and 175. Be sure to use the appropriate bid and ask prices. a. What will be your cash flow per share when you set up the position? Show all cash flows: inflows, outflows, and net flow. Inflow Outflow Net Flow b. The maximum profit on the put bear spread is c. The minimum profit on the put...
mich of the following strategy can make profit from underlying price drop? A. Buying a put B. Selling a put C. Protective put D. Bullish spread E. None above 7. Which of the following is the riskiest single-option transaction? A. Writing a call B. Buying a put C. Writing a put D. Buying a call E. Riskiness of the all the strategies above is the same 8. Which of the following combinations have similarly shaped profit/loss diagrams? A. Covered Call...
When is it appropriate for an investor to purchase a butterfly spread? Suppose three put options on a stock have the same expiration date and strike prices of $65, $70, and $75. The market prices are $3.50, $6, and $7.50, respectively. Explain how a butterfly spread can be created. Construct a table showing the profit from the strategy. For what range of stock prices would the butterfly spread lead to a loss?
When is it appropriate for an investor to...
. Dividing Money There is a $10 available prize, and Players 1,2 must try to agree on a di- vision, via the following game: Player 1 writes down a proposed offer x1 to Player 2 (i.e proposes that he, P1, keep 10-x of the prize, giving the remaining xi to Player 2). Player 2 simultaneously writes down a demand for himself, x2: If x1 2x2 (P1's offer weakly exceeds P2's demand), the money is divided according to Pl's suggested split...
our Section: 1. Which of the following trading strategy prefers the options to be out-of-the-money! A. Selling Put B. Selling Call C. Covered Call D. All above E. None above 2. Which of the following option strategy requires the SAME exercise price of options? A. Bearish spread B. Bullish spread C. Straddle D. All above E. None above 3. An European put option gives its holder the right to : A. buy the underlying asset at the exercise price on...
Profit or Loss from a futures risk management strategy: I. Is the difference between the current price of the futures contract and its future price; II. Is used to offset the profit or loss of the previous market transaction; III. Is highly undesirable because does not allow to hedge the spot price of an underlying asset. Select one: O a. Only I is correct O b. Only Il is correct o c. Only III is correct O d. Only I...
3. Dividing Money There is a $10 available prize, and Players 1,2 must try to agree on a di- vision, via the following game: Player 1 writes down a proposed offer x1 to Player 2 (i.e., proposes that he, P1, keep 10-xi of the prize, giving the remaining xi to Player 2). Player 2 simultaneously writes down a demand for himself, x2: If xi >x2 (Pl's offer weakly exceeds P2's demand), the money s divided according to P1's suggested split...
Two random samples of student loans were collected: one from students at for-profit schools and another from students at non-profit schools. The accompanying data show the sample sizes and the number of loans in each sample that defaulted. Complete parts a through c. Click the icon to view the loan data. a. Perform a hypothesis test using a = 0.10 to determine if the proportion of for-profit loans that default is larger than the proportion of loans for nonprofit schools...
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