Homework Answers
Gap put options for payoff : case 1
Case 2 
It gap put option is not excercised for negative payoff then the option is not really an option .
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Graph the payoff functions for the gap call option if the trigger price Kr is greater than the st...
Graph the payoff functions for the gap call option if the trigger price Ktr is greater than the s...
Graph the payoff functions for the gap call option if the trigger price Ktr is greater than the strike price Kst and if Ktr < Kst. Draw two similar graphs for the gap put option. When is the gap put option “not really an option” and why do you say so? Please help, thank you!
g) European call with a strike price of $40 costs $7. European put with the same...
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...
Long currency straddle Call option premium = $0.05/€, Put option premium = $0.05/€ Strike price =...
Long currency straddle Call option premium = $0.05/€, Put option premium = $0.05/€ Strike price = $1.10/€, Option contract size = €62,500 Draw graphs of call option, put option, and straddle Mark BE point and Strike prices Mark each premium Spot exchange rate $1.00/€ $1.05/€ $1.10/€ $1.15/€ $1.20/€ $1.25/€ Long call option Exercise (N/Y) Holder’s net profit per unit Long put option Exercise (N/Y) Holder’s net profit per unit Net profit Net profit per unit (graph) Short currency straddle Call...
If the spot price of the underlying asset is greater than the strike price, a call...
If the spot price of the underlying asset is greater than the strike price, a call option is ______ and a put option is ______. A. in the money; out of the money B. out of the money; in the money C. in the money; in the money D. out of the money; out of the money E. at the money; at the money
Assume you buy a call option for £31,250 with a strike price of $1.330/f and a...
Assume you buy a call option for £31,250 with a strike price of $1.330/f and a premium of $.0OSVE Assume you buy a put option for £31,250 with a strike price of S1.310/s and a premium of s.ovE. 1. Turn in a spreadsheet (Use Excel) (50 points) Examine the payoffs from possible ending spot rates of $1.270/E to $1.370/E with increments of $.005. (i.e, 1.270, 1.275, 1.280,.... ..365, 1.370) Build a spreadsheet exactly as we did in class to show...
5. Suppose the current price of a stock is $35, and one associated six-month call option...
5. Suppose the current price of a stock is $35, and one associated six-month call option with a strike price of $36 currently sell for $3.5. Rachel Heyhoe-Flint, an amateur investor, feels that the price of the stock will increase and so she comes up with the following two possible strategies: (i) purchase 100 shares and (ii) buying 1,000 call options. Both strategies involve an investment of $3,500. How much the stock has to rise after six months for the...
Assume that you have shorted a call option on Intuit stock with a strike price of...
Assume that you have shorted a call option on Intuit stock with a strike price of $40; when you originally sold (wrote) the option, you received $5. The option will expire in exactly three months' time. a. If the stock is trading at $55 in three months, what will your payoff be? What will your profit be? b. If the stock is trading at $35 in three months, what will your payoff be? What will your profit be? c. Draw...
Fin 463/565 inclass assignment Chapter 9 1. Draw a payoff and a profit line graph for...
Fin 463/565 inclass assignment Chapter 9 1. Draw a payoff and a profit line graph for writing a put option at K= $60. Each option price costs = $8. Under what circumstances will the writer of the option (the party with the short position) make a profit? 2. Consider an exchange-traded call option contract that lets you buy 500 shares with o strike price of $40. Explain how the terms of the option contract change when there is a) A...
Consider an option strategy where the investor simultaneously buys one call with an exercise price of...
Consider an option strategy where the investor simultaneously buys one call with an exercise price of $100, sells two calls with an exercise price of $110 and buys one call with an exercise price of $120 all with the same expiration date. Calculate the payoff of the strategy when spot price of the underlying is less than $100, between $100 and $110, between $110 and $120, and greater than $120 at expiration. Draw a payoff diagram for this strategy. What...
Consider an option strategy where the investor simultaneously buys one call with an exercise price of...
Consider an option strategy where the investor simultaneously buys one call with an exercise price of $120 and sells one call with an exercise price of $110 both with the same expiration date. Calculate the payoff of the strategy when spot price of the underlying is less than $110, between $110 and $120, and greater than $120 at expiration. Draw a payoff diagram for this strategy. What is the bet being made with this strategy?
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...
Assume you buy a call option for £31,250 with a strike price of $1.330/f and a premium of $.0OSVE Assume you buy a put option for £31,250 with a strike price of S1.310/s and a premium of s.ovE. 1. Turn in a spreadsheet (Use Excel) (50 points) Examine the payoffs from possible ending spot rates of $1.270/E to $1.370/E with increments of $.005. (i.e, 1.270, 1.275, 1.280,.... ..365, 1.370) Build a spreadsheet exactly as we did in class to show...
5. Suppose the current price of a stock is $35, and one associated six-month call option with a strike price of $36 currently sell for $3.5. Rachel Heyhoe-Flint, an amateur investor, feels that the price of the stock will increase and so she comes up with the following two possible strategies: (i) purchase 100 shares and (ii) buying 1,000 call options. Both strategies involve an investment of $3,500. How much the stock has to rise after six months for the...
Assume that you have shorted a call option on Intuit stock with a strike price of $40; when you originally sold (wrote) the option, you received $5. The option will expire in exactly three months' time. a. If the stock is trading at $55 in three months, what will your payoff be? What will your profit be? b. If the stock is trading at $35 in three months, what will your payoff be? What will your profit be? c. Draw...
Fin 463/565 inclass assignment Chapter 9 1. Draw a payoff and a profit line graph for writing a put option at K= $60. Each option price costs = $8. Under what circumstances will the writer of the option (the party with the short position) make a profit? 2. Consider an exchange-traded call option contract that lets you buy 500 shares with o strike price of $40. Explain how the terms of the option contract change when there is a) A...
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