In expectation of increased price volatility, you purchased a at-the-money call option and at the same time bought a at-the-money put option with common exercise prices of $15. Option premium at $3 ea...
In expectation of increased price volatility, you purchased a at-the-money call option and at the same time bought a at-the-money put option with common exercise prices of $15. Option premium at $3 each. Your strategy is known as a_____? Please draw out the payoff-profile of this strategy and clearly state all key info. What is the maximum $ would you lose with this strategy?
Homework Answers
Answer :- The strategy is called as Collar.
Explanation :- If stock market price rises, You will exercise call option and in case, the stock price falls then you will exercise put option. Accordingly, such strategy is known as collar in the finance.
Maximum loss with such strategy will be equal to amount of option premium i.e., $ 3.00 in the given question.
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In expectation of increased price volatility, you purchased a at-the-money call option and at the same time bought a at-the-money put option with common exercise prices of $15. Option premium at $3 ea...
EXplain 21, and 22.*(DOUBLE-WEİGHD Suppose a call option on a given stock has premium $4 per share, and the put option at the same exercise price (E-$100) has premium $3 per share. The price of a...
EXplain 21, and 22.*(DOUBLE-WEİGHD Suppose a call option on a given stock has premium $4 per share, and the put option at the same exercise price (E-$100) has premium $3 per share. The price of a Treasury security having the same maturity as the option is.9800 (dollars per face). a. What would you expect the price of the underlying security to be? b. Illustrate with a graph the profit or payoff profile that would result from a "covered call" (write...
Suppose you construct the following European option trades on Apple stock: write a put option with exercise price $32 and premium $2.86, and write a call option with exercise price $32 and premium $3....
Suppose you construct the following European option trades on Apple stock: write a put option with exercise price $32 and premium $2.86, and write a call option with exercise price $32 and premium $3.51. What is your maximum dollar net profit, per share?
Consider a European call option on €62,500 with an exercise price of $1.50/€. You pay an...
Consider a European call option on €62,500 with an exercise price of $1.50/€. You pay an option premium of $0.10/€ for the call option today. a. If the $-€ spot exchange rate is $1.62/€ on the contract expiration date, would you exercise the call option (buy € at the exercise price at expiration)? What would be the option payoff and profit? b. If the $-€ spot exchange rate is $1.45/€ on the contract expiration date, would you exercise the call...
You can: - write an option 1: call option with an exercise price of PLN 100...
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12. (2 points) A call option on Brocklehurst Corp. has an exercise price of $30. The current stock price of Brocklehurst Corp. is $32. The call option is a. at the money b. in the money c. out of the money d. knocked in 13. (3 points) You purchase one MBI March 120 put contract (equaling 100 shares) for a put premium of 510. The maximum profit that you could gain from this strategy is 2. S120 b. $1,000 c....
Exerc In July 2008, fearing further appreciation of the zloty, you bought a 3-month put option...
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Exerc In July 2008, fearing further appreciation...
You bought British pound call option at a premium of $0.11 per unit. The exercise price...
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You bought British pound call option at a premium of $0.11 per unit. The exercise price...
You bought British pound call option at a premium of $0.11 per unit. The exercise price is $1.73. In three months (right before your option expires), you can buy British pounds for $1.93 per unit in the spot market. What will be your net profit? OA $0.11 OB. $0 OC. $0.09 D. $0.20 Reset Selection
You bought British pound put option at a premium of $0.07 per unit. The exercise price...
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You bought British pound put option at a premium of $0.07 per unit. The exercise price...
You bought British pound put option at a premium of $0.07 per unit. The exercise price is $1.73. In three months (right before the option expires), one can buy British pounds for $1.93 per unit in the spot market. What will be your net profit? A.-30.07 OB. 50 OC $0.13 OD. 50.20 Reset Selection
EXplain 21, and 22.*(DOUBLE-WEİGHD Suppose a call option on a given stock has premium $4 per share, and the put option at the same exercise price (E-$100) has premium $3 per share. The price of a Treasury security having the same maturity as the option is.9800 (dollars per face). a. What would you expect the price of the underlying security to be? b. Illustrate with a graph the profit or payoff profile that would result from a "covered call" (write...
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Exerc In July 2008, fearing further appreciation of the zloty, you bought a 3-month put option for 100,000 USD at 2 PLN/USD, paying premium 10 groszys for 1 USD. To cover the significant costs of this option, you wrote 3 month USD call options at 2 PLN/USD receiving premium 2 groszys for 1 USD. Draw your profit/loss profile What will be your profit/loss if the exchange rate in 3 months is 4 PLN/USD
Exerc In July 2008, fearing further appreciation...
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You bought British pound call option at a premium of $0.11 per unit. The exercise price is $1.73. In three months (right before your option expires), you can buy British pounds for $1.93 per unit in the spot market. What will be your net profit? OA $0.11 OB. $0 OC. $0.09 D. $0.20 Reset Selection
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