ZuoTi.Pro
Question

Suppose you buy 100 shares of ABC Company at $50 today and write one MAY 48...

Suppose you buy 100 shares of ABC Company at $50 today and write one MAY 48 put at $3.50. If at expiry of the put, ABC’s stock price is $55, what is your total gain or loss?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Amount invested is = 50×100 = 5000

Premium received on put option is 3.5×100 = 350

On the date of expiry price is 55 so put option is out of money so it will not be exercised

So realised gain is 350

Unrealised gain is appreciation in stock is 5×100= 500

Total gain is 500+350= 850

0 0
Add a comment
Know the answer?
Add Answer to:
Suppose you buy 100 shares of ABC Company at $50 today and write one MAY 48...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Suppose you buy a May expiration call option on 100 shares (@ $3.80) with the excise...

    Suppose you buy a May expiration call option on 100 shares (@ $3.80) with the excise price of $140. a.) If the stock price in May is $152, will you exercise your call? (Yes or No) What is the net profit/loss on your position? What is the rate of return on your position? b.) What if you had bought an May put option on 100 shares with exercise price $140 at a price of ($2.71) instead? Would you exercise the...

  • Suppose you buy 100 shares of Google stock which has a current price of $1,265.13 a...

    Suppose you buy 100 shares of Google stock which has a current price of $1,265.13 a share. You want to ensure that you do not lose more than $200 a share. Which of the following option strategies would allow you to do this? A. A covered call B. A naked call C. A protective put D. You cannot ensure that you will not have losses with stocks Suppose I buy 100 shares of AMD and want to limit my losses...

  • A company has offered you a $5,000 bonus, which you may receive today, or 100 shares...

    A company has offered you a $5,000 bonus, which you may receive today, or 100 shares of the company’s stock, which has a current stock price of $50 per share. Mathematically, what is the best choice? Why? B. What are the advantages and disadvantages of each option? Be sure to support your answers. C. What would you ultimately choose to do? What is your financial reasoning behind this choice? Consider supporting your answer with quantitative data. I will thumbs up...

  • Suppose you have $200 with which you can buy shares of stock from two companies: ABC...

    Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade. Each company's stock currently sells for $100 per share. ABC hot chocolate company: If the temperature next year is lower than average, the interest rate will be 20%. There is a 50% chance that it will be colder than average next year. But if the temperature is warmer (50% chance), there is no returns from this stock. XYZ...

  • 1.You write a short put option giving the purchaser the right to sell 100 shares of...

    1.You write a short put option giving the purchaser the right to sell 100 shares of Rothbard Corporation for a premium of $1,300. The strike price of the option is $20 and the final stock price is $85. What is your profit or loss? 2.You write a short call option giving the purchaser the right to buy 100 shares of Garrett Corporation for a premium of $1,600. The strike price of the option is $35 and the final stock price...

  • On December 21, 2020, you purchased 100 shares of ABC company at $11 per share. You...

    On December 21, 2020, you purchased 100 shares of ABC company at $11 per share. You plan to sell your shares on December 21, 2021 and are concerned about  downside risk. A put option on ABC stock with an exercise price (K) of $40 is currently priced (P) at $2 per share. Also, two call options on ABC stock with exercise prices (K) of $40 and $65 are priced (C) at $2.5 and $1.50 per share, respectively. All options expire on...

  • You simultaneously write a put and buy a call, both with strike prices of $50, naked, i.e., without any position in the underlying stock. What are the expiration date payoffs to this position for...

    You simultaneously write a put and buy a call, both with strike prices of $50, naked, i.e., without any position in the underlying stock. What are the expiration date payoffs to this position for stock prices of $40, $45, $50, $55, and $60? (Negative amounts should be indicated by a minus sign. Leave no cells blank- be certain to enter "0" wherever required. Omit the "S" sign in your response.) Stock Call Payoff Total Payof Price $40 $ $45 $...

  • On January 1st 2020, Able Company purchased 100 of the 100,000 shares of ABC Company which...

    On January 1st 2020, Able Company purchased 100 of the 100,000 shares of ABC Company which is traded on the New York Stock Exchange. On January 3rd ABC Company declared and paid a $1.00 per share dividend. In 2020, ABC Company reported a loss of $1000. What journal entry would Able make upon receiving the $100 dividend check? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Debit cash 100 credit...

  • 1. You buy a stock for $50 per share and simultaneously buy a put with a...

    1. You buy a stock for $50 per share and simultaneously buy a put with a $50 strike price and a $1.00 premium. If the stock price falls to $45 per share, what is your per-share net profit from this investment position? If you think net profit is negative, enter your answer using a number preceded by a minus sign. If you think net profit is positive, enter your answer as a number. 2. You buy a stock for $50...

  • Suppose stock ABC is worth 100 at t=0 and there are two scenarios for the stock...

    Suppose stock ABC is worth 100 at t=0 and there are two scenarios for the stock price at t=1 The stock price can go up to 110 The stock price can go down to 90 Now consider a PUT option on ABC with exercise price 100. In the portfolio of stock and zero coupon bond that replicates the payoff of the put option (the replicating portfolio), what is your position in ABC stock Select one: a. You are long 1/2...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT