Homework Answers
Option A
Explanation: Options provide a right but not an obligation to execute a buy or sell.
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Which of the following is true of investors using options to manage risk? O A. Options...
1.Which of the following is not the reason for Basic risk of hedging using futures? a....
1.Which of the following is not the reason for Basic risk of hedging using futures? a. The asset whose price is to be hedge may not be exactly the same as the underlying asset of the futures contract b. The asset whose price is to be hedge may not be exactly the same as the price of the futures contract c. The hedger may not be certain of the exact date the asset will be bought or sold d. The...
Assume the Black-Scholes framework for options pricing. You are a portfolio manager and already have a...
Assume the Black-Scholes framework for options pricing. You are a portfolio manager and already have a long position in Apple (ticker: AAPL). You want to protect your long position against losses and decide to buy a European put option on AAPL with a strike price of $180.15 and an expiration date of 1-year from today. The continuously compounded risk free interest rate is 8% and the stock pays no dividends. The current stock price for AAPL is $200 and its...
1. Based on the data given, which of the following options is most likely to exhibit...
1. Based on the data given, which of the following options is
most likely to exhibit the largest gamma measure?
A. Option I
B. Option J
C. Option K
D. None of the answers
2. If Wayne uses option K contract to hedge its position and
HG’s share price subsequently dropped from $38 to $36, Wayne would
most likely need to take the following action to maintain the same
hedged position:
A. Sell options because the put delta has become...
(11 Suppose that Facebook stock is currently priced at $170 per share and you have bought...
(11 Suppose that Facebook stock is currently priced at $170 per share and you have bought a put option with the strike price at $150 per share. The option premium is $10. The intrinsic value of your option is A) -$10. B) $0. C) $10. D) $20. One share of General Electric stock is priced at $10 today. Both options below are on General Electric stock and expire in 3 months. Option A Option B Type Call option Put option...
Assume you just purchased 100 shares of Apple stocks at $580. You are worrying that the competition...
Assume you just purchased 100 shares of Apple stocks at $580. You are worrying that the competition from other tablet PC producers will have a negative impact on Apple stock prices in 1 month. Generally speaking, you are still quite bullish on Apple stock. (i) In order to hedge against this downside risk, you establish a protective put position by buying a put option contract with around 1-month maturity on Apple stock (note: 1 contract consists of 100 options). Each put option...
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...
Determine which of the following statements are True (T) and which are False (not true) (F)....
Determine which of the following statements are True (T) and which are False (not true) (F). a. _____ Macaulay Duration and term are inversely related. b. _____ Bachelier was a partner of LTCM. c. _____ Put-Call Parity states that . d. _____ One can purchase stock by being assigned when short a put option. e. ______ The Gamma of calls is positive and of puts is negative. f. ______ In polling a greater confidence level results in a more accurate...
04: Which one of the following situations will produce the me Assume the options are all...
04: Which one of the following situations will produce the me Assume the options are all in-the-money. Wations will produce the highest put price, all else constant? A. $15 strike price; 45 days to option expiration B. $15 strike price: 60 days to option expiration C. $20 strike price; 45 days to option expiration D. $20 strike price; 60 days to option expiration E. Insufficient information is provided to answer this question Q5: You know that a call will finish...
The derivatives markets contain different types of contracts. Forward contracts, futures contracts, options, and swaps are...
The derivatives markets contain different types of contracts. Forward contracts, futures contracts, options, and swaps are some common types of derivatives contracts. True or False: One of the major differences between futures and forward contracts is that forward contracts are revalued and marked-to-market daily, whereas futures contracts are traded on an organized exchange. O False True Which of the following are used to hedge against fluctuating interest rates, stock prices, and exchange rates? Commodity futures Financial futures O Ahmad feels...
in which one of the following types of contract between a seller and a buyer does...
in which one of the following types of contract between a seller and a buyer does the seller agree to sell a specified asset to the buyer today and then buy it back at a specified time in the future at an agreed future price. a) repurchase agreement . C) swap d) call e) none of the above Organized options markets are different from over- the counter options markets for all of the following reasons except a) legal contracts c)...
Assume the Black-Scholes framework for options pricing. You are a portfolio manager and already have a long position in Apple (ticker: AAPL). You want to protect your long position against losses and decide to buy a European put option on AAPL with a strike price of $180.15 and an expiration date of 1-year from today. The continuously compounded risk free interest rate is 8% and the stock pays no dividends. The current stock price for AAPL is $200 and its...
1. Based on the data given, which of the following options is
most likely to exhibit the largest gamma measure?
A. Option I
B. Option J
C. Option K
D. None of the answers
2. If Wayne uses option K contract to hedge its position and
HG’s share price subsequently dropped from $38 to $36, Wayne would
most likely need to take the following action to maintain the same
hedged position:
A. Sell options because the put delta has become...
(11 Suppose that Facebook stock is currently priced at $170 per share and you have bought a put option with the strike price at $150 per share. The option premium is $10. The intrinsic value of your option is A) -$10. B) $0. C) $10. D) $20. One share of General Electric stock is priced at $10 today. Both options below are on General Electric stock and expire in 3 months. Option A Option B Type Call option Put option...
04: Which one of the following situations will produce the me Assume the options are all in-the-money. Wations will produce the highest put price, all else constant? A. $15 strike price; 45 days to option expiration B. $15 strike price: 60 days to option expiration C. $20 strike price; 45 days to option expiration D. $20 strike price; 60 days to option expiration E. Insufficient information is provided to answer this question Q5: You know that a call will finish...
The derivatives markets contain different types of contracts. Forward contracts, futures contracts, options, and swaps are some common types of derivatives contracts. True or False: One of the major differences between futures and forward contracts is that forward contracts are revalued and marked-to-market daily, whereas futures contracts are traded on an organized exchange. O False True Which of the following are used to hedge against fluctuating interest rates, stock prices, and exchange rates? Commodity futures Financial futures O Ahmad feels...
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