Tom Smith purchases 100 shares of DOUBLE Systems stock for $63 per share and wishes to...
-
Tom Smith purchases 100 shares of DOUBLE Systems stock for $63 per share and wishes to hedge his position by writing a 100 share call option on his holdings. The option per share has a $65 strike price and a premium of $8.75. If the stock is selling at $64 at the time of expiration, what will be the overall dollar gain or loss on this covered option play? (Consider the change in stock value as well as the gain or loss on the option.)
-
$975.00
-
$875.00
-
$775.00
-
$100.00
-
$87.50
-
Homework Answers
The strategy is called covered call. It consists of a long stock and a short call.
Stock price at expiration = 64
Number of stock = 100
Buying price of stock = 63
profit from stock at expiration = (64 - 63) × 100 = $100
Premium from options = 8.75 × 100 = $875
The option is not exercised as the strike price ($65) is more than the stock price.
Therefore total profit = profit from stock + option premium
= $100 + $875
= $975
Add Answer to:
Tom Smith purchases 100 shares of DOUBLE Systems stock for $63
per share and wishes to...
Lauren purchases 100 shares of Greshak Corp. stock for $63.00 per share and wishes to hedge...
Lauren purchases 100 shares of Greshak Corp. stock for $63.00 per share and wishes to hedge her position by writing a 100 share call option on her holdings. The option has a $65.00 strike price and a premium of $8.75. If Greshak's stock is selling for $64.00 at the time of option's expiration, what will be the overall dollar ($) gain or loss on this covered option strategy? (Consider the underlying stock holding as well the options.) YOU MUST SHOW...
I need help Suppose you own 100,000 shares of a stock selling for $20 a share....
I need help Suppose you own 100,000 shares of a stock selling for $20 a share. You also purchased a PUT option for each share of stock for $4 per share. Strike price (exercise price) is $20. At option expiration, the stock is selling for $15. What should you do regarding the put? Sell the put Exercise the put Buy more put options to offset the loss on the stock Let the put option expire unexercised The transaction above is...
QUESTION 1 Today you are writing a put option on TSLA stock, which is currently valued at $200 per share. The put optio...
QUESTION 1 Today you are writing a put option on TSLA stock, which is currently valued at $200 per share. The put option has a strike price of $178, 6 months to expiration, and currently trades at a premium of $6.1 per share. If at maturity the stock is trading at $164, what is your net profit on this position? Keep in mind that one option Covers 100 shares. QUESTION 2 Today you go long on 5 December contracts of...
A company purchases 500 shares of $25 par value common stock for $43 per share. In...
A company purchases 500 shares of $25 par value common stock for $43 per share. In addition, the broker charges a commission of $750. 100 of these shares are sold for $49.00 per share. The broker charges a commission of $50 for this sale. What is the amount of gain or loss on the sale? $600 gain $600 loss $9,250 loss $12,750 gain
The current price of a continuous-dividend-paying stock is $100 per share. Its volatility is given to...
The current price of a continuous-dividend-paying stock is $100 per share. Its volatility is given to be 0.30 and its dividend yield is 0.03. The continuously-compounded, risk-free interest rate equals 0.06. Consider a $95-strike European put option on the above stock with three months to expiration. Using a one-period forward binomial tree, find the price of this put option. (a) $3.97 (b) $4.38 (c) $4.70 (d) $4.97 (e) None of the above.
The current price of a continuous-dividend-paying stock is $100 per share. Its volatility is given to...
The current price of a continuous-dividend-paying stock is $100 per share. Its volatility is given to be 0.30 and its dividend yield is 0.03. The continuously-compounded, risk-free interest rate equals 0.06. Consider a $95-strike European put option on the above stock with three months to expiration. Using a one-period forward binomial tree, find the price of this put option. (a) $3.97 (b) $4.38 (c) $4.70 (d) $4.97 (e) None of the above.
covered call writer break even at (4) The current price of an asset is $100, An...
covered call writer break even at (4) The current price of an asset is $100, An out-of-the-money American put option with an exercise price of $90 is purchased along with'the asset. If the breakeven point for this hedge is at an asset price of $114 at expirationjwhatis the value of the American put at the time of purchase? (5) A stock index fiutures what is your per-share gain or loss? ying two calls and one put on ABC stock, all...
5) (4 pts) Alan just bought 100 shares of Global, Inc. (GLO) at $48 per share and as protection he also bought a three-month put with a $45 strike price at a cost of $250. IF GLO stock unexpected...
5) (4 pts) Alan just bought 100 shares of Global, Inc. (GLO) at $48 per share and as protection he also bought a three-month put with a $45 strike price at a cost of $250. IF GLO stock unexpectedly declines to $33 calculate the total profit or loss and explain how the hedge has provided protection for Alan's position in GLO. Ignore transaction costs. Strick: 니S Total profit or Loss = Explain how hedge provided protection: wehare l7 s hareo...
In 2020, Jeff sold 1,000 shares of IBM stock to his son Alex for $100 per...
In 2020, Jeff sold 1,000 shares of IBM stock to his son Alex for $100 per share. He had purchased the IBM stock back in 2015 for $150 per share. If Alex sales the IBM Stock in 2025 for $170 per share, how much of a gain or loss does Alex recognize for tax purposes? Please enter a loss as a negative number.
13. Reducing risks with put options Aa Aa Alison owns 100 shares of RTE Telecom Inc. stock that she bought for $40 per share. Alison bought a put option for all 100 shares of the stock with a strike...
13. Reducing risks with put options Aa Aa Alison owns 100 shares of RTE Telecom Inc. stock that she bought for $40 per share. Alison bought a put option for all 100 shares of the stock with a strike price of $37 per share, option price of $2 per share, and a three-month term. Alison probably bought the option because she What did Alison pay to buy the option? $| sees a bright future for the company and its stock...
QUESTION 1 Today you are writing a put option on TSLA stock, which is currently valued at $200 per share. The put option has a strike price of $178, 6 months to expiration, and currently trades at a premium of $6.1 per share. If at maturity the stock is trading at $164, what is your net profit on this position? Keep in mind that one option Covers 100 shares. QUESTION 2 Today you go long on 5 December contracts of...
A company purchases 500 shares of $25 par value common stock for $43 per share. In addition, the broker charges a commission of $750. 100 of these shares are sold for $49.00 per share. The broker charges a commission of $50 for this sale. What is the amount of gain or loss on the sale? $600 gain $600 loss $9,250 loss $12,750 gain
covered call writer break even at (4) The current price of an asset is $100, An out-of-the-money American put option with an exercise price of $90 is purchased along with'the asset. If the breakeven point for this hedge is at an asset price of $114 at expirationjwhatis the value of the American put at the time of purchase? (5) A stock index fiutures what is your per-share gain or loss? ying two calls and one put on ABC stock, all...
5) (4 pts) Alan just bought 100 shares of Global, Inc. (GLO) at $48 per share and as protection he also bought a three-month put with a $45 strike price at a cost of $250. IF GLO stock unexpectedly declines to $33 calculate the total profit or loss and explain how the hedge has provided protection for Alan's position in GLO. Ignore transaction costs. Strick: 니S Total profit or Loss = Explain how hedge provided protection: wehare l7 s hareo...
In 2020, Jeff sold 1,000 shares of IBM stock to his son Alex for $100 per share. He had purchased the IBM stock back in 2015 for $150 per share. If Alex sales the IBM Stock in 2025 for $170 per share, how much of a gain or loss does Alex recognize for tax purposes? Please enter a loss as a negative number.
13. Reducing risks with put options Aa Aa Alison owns 100 shares of RTE Telecom Inc. stock that she bought for $40 per share. Alison bought a put option for all 100 shares of the stock with a strike price of $37 per share, option price of $2 per share, and a three-month term. Alison probably bought the option because she What did Alison pay to buy the option? $| sees a bright future for the company and its stock...
Most questions answered within 3 hours.
-
Research new software products that assist in project
communication management. Write a paper summarizing your findings,...
asked 12 minutes ago -
the figure below to the left shows a beaker completely filled
with water. then a block...
asked 10 minutes ago -
A certain rifle bullet has a mass of 5.25 g. Calculate the de
Broglie wavelength of...
asked 14 minutes ago -
what is the duistribution channels of HUL in india and how they
distribute?
how is this...
asked 18 minutes ago -
Batteries play an important role in our everyday lives. From
making many devices mobile, to allowing...
asked 30 minutes ago -
It is possible to iterate through an array quickly and easily
using a loop?
asked 38 minutes ago -
Determine the pHpH of an HFHF solution of each of the following
concentrations. The KAKA value...
asked 33 minutes ago -
Two point charges of 7.0mL are initially 11.5m apart. What is
the change in potential energy...
asked 34 minutes ago -
Please write as a short answer
You have heartburn and a two hour working session on...
asked 39 minutes ago -
Please solve with excel and mention the excel function.
Thanks
Kevin deposits $10,000 in a savings...
asked 40 minutes ago -
Which Special Journal would the following transaction be
journalized in?
Sold merchandise on account to Customer...
asked 53 minutes ago -
Assuming 100% dissociation, calculate the freezing point (?fTf)
and boiling point (?bTb) of 1.45 ? K3PO4(aq)1.45...
asked 55 minutes ago