Suppose you expect the volatility is high and is uncertain about the price movement of the underlying, which of the following is your best strategy?
A. Long put
B. Long butterfly spreads
C. Long call
D. Long straddle
According to me Long straddle is the best strategy. Because as per the information the price movement of the stock is uncertain and the volatility is high. And as per the strategy I buy 1 long call and 1 long put at the same strike price. In this case the cost will be limited to the premiums paid but the gain will be unlimited.
If the price goes beyond the strike price then I will only subscribe the long call option. In that case I buy the stock at strike price and sell the stock at spot price in the market and the difference will be my profit after deducting the premiums paid.
On the other hand if the stock price goes below the strike price then I will only subscribe the long put option. Here I sell the stock at strike price by buying the stock at spot price from the market. Again the difference will be my profit after deducting the premiums paid.
Suppose you expect the volatility is high and is uncertain about the price movement of the...
Suppose you expect the volatility is high and the price of the underlying will fall, which of the following strategies is not preferred? A. Short call B. Short underlying C. Long put D. Short forward
E. None above The following information is used for Question 14-17; You want to establish a straddle on Apple. The available call premium is $5 and put premium is $6. Suppose X-S50 for both the call and the put. fit of this strategy? 16. What is the expectation of the investors who use this strategy A. Underlying price will increase only B. Underlying price will decrease only C. Underlying price volatility is going to be large D. Underlying price volatility...
NEED HELP . It pays to invest in a strap if you expect the A. volatility of the asset price to be low, and an upward movement in stock price is more likely than a downward movement B. volatility to be low, and a downward movement in stock price is more likely C. volatility to be high, and an upward movement in stock price is more likely D. volatility to be high, and a downward movement in stock price is...
11. With respect to put-call parity, a covered call is equivalent to? A. Buying a call B. Selling a put C. Selling a put and invest in risk-free bond D. Selling a put and borrow from risk-free bond E. None above The following information is used for Question 12-15; You want to establish a straddle on Apple. The available call premium is $5 and put premium is $6. Suppose X=$50 for both the call and the put. 12. What is...
Suppose you buy 100 shares of Google stock which has a current price of $1,265.13 a share. You want to ensure that you do not lose more than $200 a share. Which of the following option strategies would allow you to do this? A. A covered call B. A naked call C. A protective put D. You cannot ensure that you will not have losses with stocks Suppose I buy 100 shares of AMD and want to limit my losses...
Assume that you believe that a certain stock will face a high volatility in the near future, since the company will release their annual report in two weeks time, and you think that it will contain some surprises. You don't know if it will be good or bad surprises,why you create a straddle by purchasing a call and a put option with the same strike price 103. The put option premium is 6.5 and the call option premium is 8....
Assume that you believe that a certain stock will face a high volatility in the near future, since the company will release their annual report in two weeks time, and you think that it will contain some surprises. You don't know if it will be good or bad surprises,why you create a straddle by purchasing a call and a put option with the same strike price 106. The put option premium is 3.8 and the call option premium is 8....
Suppose trader Frank is moderately bearish on the market, which trading strategy(or strategies) will you recommend to him? a. Long a butterfly b. Short a butterfly c. Long a put d. Long a bear spread e. Long a call
NEED HELP!! Which of the following are volatility strategies? Protective put Butterfly spread iii. Straddle A. į and ii B. į and iii C. ii and ii D. All of the above E. None of the above
Suppose you do a one-year straddle strategy using a Call and a Put. The strike price is $100. The underlying is the stock of company ABC. Assume the prices the stock can take next year are either $80 or $150. Both states of nature can reveal with 50% probability. (a) What are the payoff you receive in the two possible scenarios stated before? Explain what is the option you exercise in every case. (b) What is the expected payoff if...