Answer : "C. Unlimited profit, loss is limited to $4500."
=> The option bought price is the bid from the buyer side, so buyer has a risk of losing the price if stock goes up, but the profit side is open for unlimited fly if stock drops. So, in the case loss is limited to $4.5 * 10 * 10 = $4500.
A trader buys 10 Put Option contracts (1 contract is 100 shares) on AAPL with March...
The price of a stock is $64. A trader buys 1 put option contract on the stock with a strike price of $60 when the option price is $10. When does the trader make a net profit (that is greater than zero)?
4. A trader buys a European call option and sells a European put option. The options have the same underlying asset, strike price and maturity. Show that the trader's position is equivalent to a forward contract with delivery price that is equal to the strike price of the options.
4. A trader buys a call option and sells a put option. The options have the same underlying asset, strike price, and maturity. Describe the trader's position. What is the advantage to making such a trade?
The price of a stock is $64. A trader buys 1 put option contract on the stock with a strike price of $60 when the option price is $10. When does the trader make a profit? When the stock price is higher than $70 none of the above When the stock price is higher than $64 When the stock price is lower than $50 When the stock price is lower than $54
1. Adam buys a put option on British pounds (contract size is £500,000) at a premium of S0.05/£. The strike price is $1.20/£. (a) Graph the profit/loss on the option contract. (b) What is the break-even price? (a) At what range of spot prices does John make profit? 2. Bank of America buys a call option on euros (contract size is €625,000) at a premium of $0.02 per euro. If the exercise price is $0.98 and the spot price of...
The price of a stock is $67. A trader sells 5 put option contracts on the stock with a strike price of $70 when the option price is $4. The options are exercised when the stock price is $69. What is the trader’s net profit or loss? Please show work! I know the answer is “gain of $1,500”
A financial institution that buys a put option: has the right to accept delivery of the underlying security at the contract price if they wish. has the right to make delivery of the underlying security at the contract price if they wish. is obligated to accept delivery of the underlying security at the contract price. is obligated to make delivery of the underlying security at the contract price. is exposed to unlimited losses and limited gains.
A trader buys a European call option and sells (short) a European put option. The options have the same underlying asset, strike price, and maturity. Describe the trader’s position. The trader monitors the market continuously and finds at one point that the call is significantly overpriced relative to fair value. What strategy is available for the trader to lock in a profit at current prices?
Warrior Industries buys a June call option on Euros (contract size is 500,000 euros) on March 1 that has a strike (exercise) price of $0.58. They pay a premium of $0.05 per euro, and the March 1 spot rate is $0.60. On the expiration date in June, the spot rate is $0.62. What is Warrior's profit (loss) on the option? Answer options: -$15,000 -$5,000 $5,000 $0
A stock price is $25. An investor buys one put option contract on the stock with a strike price of $24 and sells a put option contract on the stock with a strike price of $22.50. The market prices of the options are $2.12 and$1.95, respectively. The options have the same maturity date. Describe the investor's position and the possible gain/loss he will get (taking into account the initial investment).