1). This option is currently out of the money. (It is a call option with the US index stock price lower than the call exercise price so it won't be exercised since call option payoff = max(stock price - exercise price, 0))
2). The option price is likely to be lower because the time value of money will decrease as the option nears expiry whereas its intrinsic value is still zero as it is out of the money.
3). Loss = max(stock price - exercise price, 0) - option price
= max(3,100 -2,925, 0) - 248.78 = -73.78
On 2020/May/08, the US 500 2925 Call (Expiry Date is 18/12/20; Strike Price is 2925.00) is...
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Problem 12. A European call and put option on a stock both have a strike price of $30 and an expiration date in three months. The price of the call is $3, and the price of the put is $2.25. The risk free interest rate is 10% per annum, the current stock price is $31. Indentify the arbitrage opportunity open to a trader.
A trader creates a long strangle with put options with a strike price of $160 per share, and call options with a strike price of $170 per share by trading a total of 20 option contracts (10 put contracts and 10 call contracts). Each contract is written on 100 shares of stock. The put option is worth $18 per share, and the call option is worth $15 per share. What is the value (payoff) of the strangle at maturity as...
A trader creates a long strangle with put options with a strike price of $160 per share, and call options with a strike price of $170 per share by trading a total of 20 option contracts (10 put contracts and 10 call contracts). Each contract is written on 100 shares of stock. The put option is worth $18 per share, and the call option is worth $15 per share. What is the value (payoff) of the strangle at maturity as...
Assignment 1 (assessment worth 10%) Due Date Monday 8th May by 5pm GMT+8 [Submission will be strictly observed. Make submission via Turnitin] Question 1 An Australian investor holds a one month long forward position on USD. The contract calls for the investor to buy USD 2 million in one month’s time at a delivery price of $1.4510 per USD. The current forward price for delivery in one month is F= $1.5225 per USD. Suppose the current interest rate interest is...
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