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1. A put option on the S&P 500 has an exercise price of 500 and a...
Opion Raitr Call Option sold has the following details. The stock price is $49, the 100,000 Stocks the nsk-free rate is 5%, the stock price volatility is 20%, and the time 20 weeks or 20/52 year. Table below shows Delta, Gamma, Vega, Theta, position in one option) to and Rho for the option (i e, for a long Single Option Value (S) Delta (per $) Gamma (per S) Vega (per %) Theta (per day) Rho (per %) $2.40 0.522 0.066...
B. decreases by approximately 4.3%. C. decreases by approximately $1.72. Answer C The put option will decrease in value as the underlying stock price increases: -0.43 x S4 S1.72. 100,000 Stocks Call Option sold has the following details. The stock price is $49, the strike price is $50, the risk-free rate is 5%, the stock price volatility is 20%, and the time to exercise is 20 weeks or 20/52 year. Table below shows Delta, Gamma, Vega, Theta and Rho for...
Problem 7 Using the information in the table below, derive your best estimate of the price of the put option, if at the same time the index level increases from 250 to 255, and the volatility increases from 10% to 14%. Assume that the changes happen instantaneously after the computation of the price and sensitivities given in the table below (no time decay). Underlying Type: Index Index Level: Volatility (% per year): Risk-Free Rate (% per year): Dividend Yield (%...
A bank has short position for 1,000 options on a stock. Each option has delta of 0.45 and a gamma of 5. (a) What is the delta of the bank position? How many shares are needed for a delta-neutral position? (b) A traded option on the stock (Option 1) has a delta of 0.6, and a gamma of 0.5. How can the bank position be made delta and gamma neutral?
A bank has a short position in 1,000 options on XYZ stock. Each option has delta of 0.45 and a gamma of 5. (a) What is the delta of the bank position? How many XYZ shares are needed for a delta-neutral position? (b) A traded option on XYZ stock (Option 1) has a delta of 0.6, and a gamma of 0.5. How can the bank position be made delta and gamma neutral?
A bank has written a call option on one stock and a put option on another stock. For the first option the stock price is 50, the strike price is 51, the volatility is 28% per annum, and the time to maturity is 9 months. For the second option the stock price is 20, the strike price is 19, and the volatility is 25% per annum, and the time to maturity is 1 year. Neither stock pays a dividend. The...
A stock option market maker has a portfolio consisting of 200
shares of ABC Corp, and the following option positions on ABC Corp.
For simplicity, each option is assumed to be written on a single
share of the stock.
The market maker is worried about stock price movements in ABC’s
stock and would like to make his portfolio delta-neutral and gamma
neutral over the night. The current stock price of ABC is $120, the
volatility of the stock is 30%,...
A stock option market maker has a portfolio consisting of 200 shares of ABC Corp, and the following option positions on ABC Corp. For simplicity, each option is assumed to be written on a single share of the stock. Quantity Exercise Price Option Type Price Delta Gamma 100 Stock 120 1 0 150 120 Call 4,3585 0,5362 0,0385 -120 125 Call 4,1383 0,4179 0,0268 100 115 Put 4,1947 -0,3289 0,0202 -100 130 Call 3,5891 0,2982 0,0238 The market maker is...
4. A call option currently sells for $7.75. It has a strike price of $85 and seven months to maturity. A put with the same strike and expiration date sells for $6.00. If the risk-free interest rate is 3.2 percent, what is the current stock price? 5. Suppose you buy one SPX call option contract with a strike of 1300. At maturity, the S&P 500 Index is at 1321. What is your net gain or loss if the premium you...
1. Jim sold 20 put option contracts on XYZ stock with an exercise price of $35.5 and an option price of $2.30. Today, the option expires and the underlying stock is selling for $34.30 a share. What is your total profit or loss on this investment? 2 ABC CO just paid a $1.20 annual dividend. The company has a policy whereby the dividend increases by 2.5 % annually. You would like to purchase 100 shares of stock in this firm...