3. For the same asset and expiry, suppose that an investor holds a put option with strike K1 and ...
4. A speculator has a portfolio which is short in a European call with strike K1 and long in a European call with strike K2 . These two calls have the same maturity and underlying asset, but K1 > K2. Say the asset has value S(T) at maturity. This portfolio is called a bull spread. (a) Write an equation to describe the payoff at maturity of the bull spread. (b) For each of the three cases S(T) < K2 <...
Exercise 1. An investor has a short position in a European put on a share for $4. The stock price is $40 and the strike price is $41 Under what cicum be cuercise (b) Under what circumstance does the investor make a profit? (c) Draw a payoff diagram plotting the investor's payoff as a function of Sr. (d) Draw a profit diagram plotting the investor's profit as a function of ST. (e) Suppose now the investor enters also into a...
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...
Option Trading 8 Leslie holds a put option on one corn futures contract, with strike K=$3.6675 per bushel. The option is about to expire, and the futures price is $3.4850 per bushel. Find Leslie's payoff.
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."...
Draw the payoff diagram for owning (buying) a call and a put option with same strike price X. List some examples and explain it.
A 1-year European put option on a stock with strike price of $50 is quoted as $7; a 1-year European call option on the same stock with strike price $30 is quoted as $5. Suppose you long one put and short one call (one option is on 100 share). a) Draw the payoff diagram for your put position and call position. (5 points) b) After 1-year, stock price turns out to be $45. What is your total payoff? What is...
A put option and a call option on a stock have the same expiration date and the same exercise (or strike price). Both options expire in 6 months. Assume that put-call parity holds and interest rate is positive. If both call and put options have the same price, which of the following is true? A) Put option is in-the-money. B) Call option is in-the-money. C) Both call and put options are in-the-money. D) Both call and put options are out-of-the-money.
Question 16 A call option on the ASX 200 index with a strike of 5000 costs 200 (in index points). A put option on the index with strike of 5000 costs 150 (in index points). An investor wishes to buy a straddle using these options. a) Is the investor betting on the direction of the ASX index or its volatility? b) Explain how to create a straddle from these two options. Construct the net payoff table (1 mark) and draw...
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You create a straddle with a call and put option with the same strike price of $50. The price of the call option is $4 and the price of the put option is $3. If the stock price is $18 at the maturity of the options, what is the net payoff from the straddle? A. $17 ம ப ்