Why do call options with strike prices above the current market price of the underlying asset have positive prices?
A.Because the price of the underlying could go down.
B.Because the price of the underlying will go down for sure.
C.Because the price of the underlying will go up for sure.
D.Because the price of the underlying could go up.
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Why do call options with strike prices above the current market price of the underlying asset...
Why do put options with strike prices lower than the current price of the underlying stock sell for positive prices? Type your answer in the blue text box below.
Suppose the prices of 3-month European call options with strike prices of $40, $45 and $50 are $6.08, $2.70, and $0.86, respectively. a) Explain how a trader can create a butterfly spread using these options. b) What is the profit when the price of the underlying asset in three months is $40 c) What is the profit when the price of the underlying asset in three months is $43 d) What is the profit when the price of the underlying...
There are following options available on the market: a. CALL with a strike price of 100 PLN and premium of 5 PLN b. PUT with a strike price of 100 PLN and premium of 10 PLN Is an arbitrage possible explain your strategy? Would it be possible if you could either buy or write above options with the same characteristic- explain your strategy
There are following options available on the market a. CALL with a strike price of 100 PLN and premium of 5 PLN b. PUT with a strike price of 100 PLN and premium of 10 PLN Is an arbitrage possible- explain your strategy? Would it be possible if you could either buy or write above options with the same characteristic-explain your strategy. [1,5 pt.] Result: NO YES
There are following options available on the market a. CALL with a strike price of 100 PLN and premium of 5 PLN b. PUT with a strike price of 100 PLN and premium of 10 PLN Is an arbitrage possible- explain your strategy? Would it be possible if you could either buy or write above options with the same characteristic-explain your strategy. [1,5 pt.] Result: NO YES
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Consider a three-year European call option with the strike price of $150. The underlying stock will pay $10-dividend two years later from now. The current stock price is $170. The risk-free rate is 3% per annum. Find the range of the call prices that do not allow any arbitrage.
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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?
Consider a call and a put option, both with strike price of $30 and 3 months to expiration. The call trades at $4, the put price is $5, the interest rate is 0, and the price of the underlying stock is $29. a.Suppose the stock does not pay dividends. Is there an arbitrage? If so, write down the sequence of trades and calculate the arbitrage profit you realize in 3 months. If not, explain why not. b.Suppose the stock will...