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.)
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Lauren purchases 100 shares of Greshak Corp. stock for $63.00
per share and wishes to hedge...
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...
Suppose you buy 100 shares of Google stock which has a current price of $1,265.13 a...
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...
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...
2. Exercise value and option price The value derived from exercising an option immediately is the...
2. Exercise value and option price The value derived from exercising an option immediately is the exercise value. No rational investor would exercise an option that is out-of-the-money, so the minimum exercise value is zero. The following table provides information regarding options on ABC Corp. stock. Because the stock's price is volatile, investors trade options to either hedge their positions or speculate on price movements. Investors can either buy options or "issue" new options, which is called writing options. Consider...
EXplain 21, and 22.*(DOUBLE-WEİGHD Suppose a call option on a given stock has premium $4 per share, and the put option at the same exercise price (E-$100) has premium $3 per share. The price of a...
EXplain 21, and 22.*(DOUBLE-WEİGHD Suppose a call option on a given stock has premium $4 per share, and the put option at the same exercise price (E-$100) has premium $3 per share. The price of a Treasury security having the same maturity as the option is.9800 (dollars per face). a. What would you expect the price of the underlying security to be? b. Illustrate with a graph the profit or payoff profile that would result from a "covered call" (write...
Wesley Corp. stock is trading for $ 30 per share. Wesley has 24 million shares outstanding...
Wesley Corp. stock is trading for $ 30 per share. Wesley has 24 million shares outstanding and a market debt-equity ratio of 0.49. Wesley's debt is zero coupon debt with a 5-year maturity and a yield to maturity of 8 %EAR (effective annual rate). a. Describe Wesley's equity as a call option. What is the maturity of the call option? What is the market value of the asset underlying this call option? What is the strike price of this call...
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...
QUESTION 1 Michael opened a margin account with a discount, online broker. Two months ago he...
QUESTION 1 Michael opened a margin account with a discount, online broker. Two months ago he sold short 100 shares of stock; the market price of the stock at that time was $63.50. Today it is priced at $47.30. If he decides to “buy to close” (i.e., buy 100 shares of stock in order to close his open “short position”) what will be his net gain or loss? (For purposes of this problem assume each trade costs $25.) $1,620 gain...
On January 1, 2019, Mills Corp. purchased a call option on shares of XYZ stock. Terms...
On January 1, 2019, Mills Corp. purchased a call option on shares of XYZ stock. Terms of the contract were as follows: Number of shares: 100 Strike price: $120 per share Expiration date: April 30, 2019 Total cost of the option contract: $90 Seller of the option contract: First Investment Bank On January 1, 2019, XYZ stock was trading at $120 per share. The following additional information is known: On March 31,2019, the price of XYZ stock was $140 per...
On January 1, 2019, Rosewood Corp. purchased a put option on shares of ICM stock. Terms...
On January 1, 2019, Rosewood Corp. purchased a put option on shares of ICM stock. Terms of the contract were as follows: Number of shares: 100 Strike price: $240 per share Expiration date: May 31, 2019 Total cost of the option contract: $100 Seller of the option contract: First Investment Bank On January 1, 2019, ICM stock was trading at $240 per share. The following additional information is known: On March 31, 2019, the price of ICM stock was $210...
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...
2. Exercise value and option price The value derived from exercising an option immediately is the exercise value. No rational investor would exercise an option that is out-of-the-money, so the minimum exercise value is zero. The following table provides information regarding options on ABC Corp. stock. Because the stock's price is volatile, investors trade options to either hedge their positions or speculate on price movements. Investors can either buy options or "issue" new options, which is called writing options. Consider...
EXplain 21, and 22.*(DOUBLE-WEİGHD Suppose a call option on a given stock has premium $4 per share, and the put option at the same exercise price (E-$100) has premium $3 per share. The price of a Treasury security having the same maturity as the option is.9800 (dollars per face). a. What would you expect the price of the underlying security to be? b. Illustrate with a graph the profit or payoff profile that would result from a "covered call" (write...
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...
On January 1, 2019, Mills Corp. purchased a call option on shares of XYZ stock. Terms of the contract were as follows: Number of shares: 100 Strike price: $120 per share Expiration date: April 30, 2019 Total cost of the option contract: $90 Seller of the option contract: First Investment Bank On January 1, 2019, XYZ stock was trading at $120 per share. The following additional information is known: On March 31,2019, the price of XYZ stock was $140 per...
On January 1, 2019, Rosewood Corp. purchased a put option on shares of ICM stock. Terms of the contract were as follows: Number of shares: 100 Strike price: $240 per share Expiration date: May 31, 2019 Total cost of the option contract: $100 Seller of the option contract: First Investment Bank On January 1, 2019, ICM stock was trading at $240 per share. The following additional information is known: On March 31, 2019, the price of ICM stock was $210...
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