A combination of Long 1 Put at K1, Short 2 Puts at K2, Short 100 shares...
Draw the shapes of each of the following: (12 points) Short Call Long Put Short Strangle Long Straddle Long Call Bear Spread Short Straddle Short Put Bull Spread Long Butterfly Short Butterfly Long Strangle
2.2 Given: S(0)-50; r= 0.05, T-6 months; K = 49. What is a lower bound for an American Call Option on non-dividend paying stock? If an American Call option in the previous question (2.2) trades at $51, we have... O ANo arbitrage opportunities. O B An arbitrage opportunity by writing the call, buying the underlying stock and investing at a risk-free rate. O CAn arbitrage opportunity by writing the call and investing at a risk-free rate O D An arbitrage...
Problem 1. 1. Calculate the price of a six-month European put option on a non-dividend-paying stock with an exercise price of $90 when the current stock price is $100, the annualized riskless rate of interest is 3%, and the volatility is 40% per year. 2. Calculate the price of a six-month European call option with an exercise price on this same stock a non-dividend-paying stock with an exercise price of $90. Problem 2. Re-calculate the put and call option prices...
The goal of this project is to examine option trading strategies. The project requires you to work in Excel with the provided spreadsheet. A) Bull Spread Payoff Long call option K1 = Short call option K2 = Stock Price (ST) Total Payoff $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 $55.00 $60.00 A) Consider buying a call option with a strike of $20 and a selling call option with strike of $30. Fill in the table for...
the value of a put and the the value of 8- The higher the strike price, the a call, all else being equal. a) higher, higher b) lower; lower c) higher, lower d) lower, higher e) Doesn't move; higher 9-A 5-month European call option on a non-dividend-paying stock has a strike price of $30. The underlying stock is selling for $32 and the risk free rate is 6%. If the market value of the call is $35, is there any...
Question 1 - 35 Points Consider a European put option on a non-dividend-paying stock where the stock price is $15, the strike price is $13, the risk-free rate is 3% per annum, the volatility is 30% per annum and the time to maturity is 9 months. Consider a three-step troc. (Hint: dt = 3 months). (a) Compute u and d. (b) Compute the European put price using a three-step binomial tree. (c) If the option in (b) is American instead...
NEED HELP WITH BOTH QUESTIONS PLZ!!!!!
2. Consider call and put options on a non-dividend paying stocks. The price of a call option with a strike price of $30 and 6 months to maturity is $1.75. If the current stock price is $29.8 and the interest rate is 10% per annum continuously compounded, what is the price of the put option with the same strike price and maturity? ve A. $1.32 B. $1.18 C. $0.96 $0.72 E. $0.48 3. Consider...
Q8-Part I (6 marks) The current price of a non-dividend-paying stock is $42. Over the next year it is expected to rise to-$44. or fall to $39. An investor buys put options with a strike price of $43. To hedge the position, should (and by how many) the investor buy or sell the underlying share (s) for each put option purchased? (6 marks) 08-Part II (9 marks) The current price of a non-dividend paying stock is $49. Use a two-step...
Please provide letter answer and explanation: 1. A call option is currently trading for $14.85 with an exercise price of $100. The stock price is currently $101. The trader who is long this call option has the right to buy the stock at a. $14.85 b. $101 c. $100 d. $85.15 2. What is the lowest possible value of a non-dividend paying American-style call assuming markets are in equilibrium? a. max[0, S0 – PV(X)] b. S0 c. max(0, S0 –...
Question 1 a. A stock price is currently $30. It is known that at the end of two months it will be either $33 or $27. The risk-free interest rate is 10% per annum with continuous compounding. What is the value of a two-month European put option with a strike price of $31? b. What is meant by the delta of a stock option? A stock price is currently $100. Over each of the next two three-month periods it is...