A synthetic European put option is created by: Buying the discount bond, buying the call option,...
- A synthetic European put option is created by:
- Buying the discount bond, buying the call option, and short-selling the stock.
- Buying the call option, short-selling the discount bond, and short-selling the stock.
- Short-selling the stock, buying the discount bond, and selling the call option.
Homework Answers
The correct answer is Option B
The Synthetic Put option is created by Short selling the underlying securities ( Bond and the stock) and then buying the call option, this is done to reduce the Volatility inherent in the market.
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A synthetic European put option is created by:
Buying the discount bond, buying the call option,...
d. $5.00 According to put-call parity for European options, purchasing a put option on ABC stock...
d. $5.00 According to put-call parity for European options, purchasing a put option on ABC stock would be equivalent to: a. Buying a call, buying ABC stock, and buying a zero-coupon bond. b. Buying a call, selling ABC stock, and buying a zero-coupon bond. Selling a call, selling ABC stock, and buying a zero-coupon bond. d. Buying a call, selling ABC stock, and selling a zero-coupon bond. C. te 1C Tha riek feee.
d. $5.00 According to put-call parity for...
Buying a put option and selling a call option are both considered a way of expressing...
Buying a put option and selling a call option are both considered a way of expressing a bearish view on a stock (i.e., that its price will decline). Draw the hockey-sticks for both buying a put and selling a call in terms of the stock price at expiry S(T), the strike (X), and the premium (C/P). Be sure to label the graphs including breakeven points and upside/downside
Consider buying a call option with a strike of $20 and selling a put option with...
Consider buying a call option with a strike of $20 and selling a put option with a strike of $20. Consider buying a put option with a strike of $30 and selling a call option with a strike of $30. Fill in the table for the payoffs of the box spread
A trader buys a European call option and sells (short) a European put option. The options...
A trader buys a European call option and sells (short) a European put option. The options have the same underlying asset, strike price, and maturity. Describe the trader’s position. The trader monitors the market continuously and finds at one point that the call is significantly overpriced relative to fair value. What strategy is available for the trader to lock in a profit at current prices?
Question 7: Consider a European call option and a European put option on a non dividend-paying...
Question 7: Consider a European call option and a European put option on a non dividend-paying stock. The price of the stock is $100 and the strike price of both the call and the put is $103, set to expire in 1 year. Given that the price of the European call option is $10.57 and the risk-free rate is 5%, what is the price of the European put option via put-call parity? Question 8: Suppose a trader buys a call...
Open Buying a Call Stock Option Open Buying a Put Stock Option Number Strike Stock Call...
Open Buying a Call Stock Option Open Buying a Put Stock Option Number Strike Stock Call Number Strike Stock Put of Contracts Price Price Premium of Contracts Price Price Premium 1 36 35 1.25 1 36 35 1.45 Intrinsic Value Intrinsic Value Time Value Time Value Cost Cost Close Close Number Strike Stock Call Number Strike Stock Put of Contracts Price Price Premium of Contracts Price Price Premium 1 36 40 4.25 1 36 40 0.05 Intrinsic Value Intrinsic Value...
Assume the following premia: Strike $950 Call $120.405 93.809 84.470 71.802 51.873 Put $51.777 74.201 1000...
Assume the following premia: Strike $950 Call $120.405 93.809 84.470 71.802 51.873 Put $51.777 74.201 1000 1020 84.470 101.214 1050 1107 137.167 I 1) Suppose you invest in the S&P stock index for $1000, buy a 950-strike put, and sell a 1050- strike call. Draw a profit diagram for this position. What is the net option premium? 2) Here is a quote from an investment website about an investment strategy using options: One strategy investors apply is a "synthetic stock."...
ABC. Draw the payoff diagrams of buying and selling a put option and call option. Which...
ABC. Draw the payoff diagrams of buying and selling a put option and call option. Which has the highest exposure in terms of loss?
A 1-year European put option on a stock with strike price of $50 is quoted as...
A 1-year European put option on a stock with strike price of $50 is quoted as $7; a 1-year European call option on the same stock with strike price $30 is quoted as $5. Suppose you long one put and short one call (one option is on 100 share). a) Draw the payoff diagram for your put position and call position. (5 points) b) After 1-year, stock price turns out to be $45. What is your total payoff? What is...
4. A trader buys a European call option and sells a European put option. The options...
4. A trader buys a European call option and sells a European put option. The options have the same underlying asset, strike price and maturity. Show that the trader's position is equivalent to a forward contract with delivery price that is equal to the strike price of the options.
d. $5.00 According to put-call parity for European options, purchasing a put option on ABC stock would be equivalent to: a. Buying a call, buying ABC stock, and buying a zero-coupon bond. b. Buying a call, selling ABC stock, and buying a zero-coupon bond. Selling a call, selling ABC stock, and buying a zero-coupon bond. d. Buying a call, selling ABC stock, and selling a zero-coupon bond. C. te 1C Tha riek feee.
d. $5.00 According to put-call parity for...
Assume the following premia: Strike $950 Call $120.405 93.809 84.470 71.802 51.873 Put $51.777 74.201 1000 1020 84.470 101.214 1050 1107 137.167 I 1) Suppose you invest in the S&P stock index for $1000, buy a 950-strike put, and sell a 1050- strike call. Draw a profit diagram for this position. What is the net option premium? 2) Here is a quote from an investment website about an investment strategy using options: One strategy investors apply is a "synthetic stock."...
4. A trader buys a European call option and sells a European put option. The options have the same underlying asset, strike price and maturity. Show that the trader's position is equivalent to a forward contract with delivery price that is equal to the strike price of the options.
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