A 6-month European call option with a strike price of $25 costs $2.24. A 6-month European put
option with a strike price of $20 costs $1.31.
a. Explain how a strangle can be created from these two options.
b. Construct a table that shows the profit from the strategy.
c. For what range of stock prices would the strategy lead to a profit.
g) European call with a strike price of $40 costs $7. European put with the same strike price and expiration date costs $6. Assume that you buy two calls and one put (strap strategy). Sketch the graph and write down functions of payoff and profit h) Consider a stock with a price of $50 and there is European put option on that stock with the strike of $55 and premium of $4. Assume that you buy 1/3 of a stock...
The table below gives today’s prices of six-month European put and call options written on a share of ABC stock at different strike prices. The stock does not pay a dividend and the risk-free interest rate is 0% per annum. Call Price ($) Strike Price ($) Put Price ($) 13.1 105 8.2 9.7 110 9.7 7.9 115 12.9 Using call options with strike prices of 105 and 110, create a bear spread and show in a table the profit of the...
6. The following table shows the premiums of European call and put options having the same underlying stock, the same time to expiration but different strike prices: StrikeCall Premium Put Premium $20 $23 $25 $3.59 $2.45 $1.89 $2.64 $4.36 $5.70 You use the above call and put options to construct an asymmetric butterfly spread with the following characteristics (i) The maximum payoff of 6 is attained when the stock price at expiration is 23 (ii) The payoff is strictly positive...
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?
A six-month European call option on a non-dividend-paying stock is currently selling for $6. The stock price is$64, the strike price is S60. The risk-free interest rate is 12% per annum for all maturities. what opportunities are there for an arbitrageur? (2 points) 1. a. What should be the minimum price of the call option? Does an arbitrage opportunity exist? b. How would you form an arbitrage? What is the arbitrage profit at Time 0? Complete the following table. c....
(b) A 6-month European call option on a non-dividend paying stock is cur- rently selling for $3. The stock price is $50, the strike price is $55, and the risk-free interest rate is 6% per annum continuously compounded. The price for 6-months European put option with same strike, underlying and maturity is 82. What opportunities are there for an arbitrageur? Describe the strategy and compute the gain.
I. The risk-free rate is 3%. Apple (AAPL) will pay a $3 dividend in 2 months. The price of a 6-month European put on AAPL with strike $160 is $12. . The price of a 6-month European put on AAPL with strike $150 is $6 . The price of a 6-month European put on AAPL with strike $140 is $10 . The price of a 6-month European call on AAPL with strike $150 is $13 Describe an arbitrage opportunity. What...
The price of a European call option on a non-dividend-paying stock with a strike price of $50 is $6. The stock price is $51, the continuously compounded risk-free rate (all maturities) is 6% and the time to maturity is one year. What is the price of a one-year European put option on the stock with a strike price of $50? $2.09 $7.52 $3.58 $9.91
You just read that a 6-month European call option on Bent Inc. with a strike price of $50 is selling for $6.31. The current stock price is $52.75 and its annual volatility is 10%. The current risk free rate for all periods up to a year is 8.25% per annum with continuous compounding. What is the value of the put with the same strike and expiration? A) $1.12 B) $1.54 C) $5.19 D) $5.67 E) $6.31
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."...