The market price of Loblaw Corporation stock has been very volatile and you think this volatility...
The market price of Loblaw Corporation stock has been very volatile and you think this volatility will continue for a few weeks. Thus, you decide to purchase a 1-month call option contract with a strike price of $47 and an option price of $1.93. You also purchase a 1-month put option contract on the stock with a strike price of $47 and an option price of $1.28. What will be your total profit or loss on all the transactions related to these option positions if the stock price is $44.80 on the day the options expire? $128 $193.00 $142.00 -$136.00 -$101.00
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The market price of Loblaw Corporation stock has been very volatile and you think this volatility...
Assume that you believe that a certain stock will face a high volatility in the near...
Assume that you believe that a certain stock will face a high volatility in the near future, since the company will release their annual report in two weeks time, and you think that it will contain some surprises. You don't know if it will be good or bad surprises,why you create a straddle by purchasing a call and a put option with the same strike price 103. The put option premium is 6.5 and the call option premium is 8....
Assume that you believe that a certain stock will face a high volatility in the near...
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4.You are given the following information: stock price is $33, strike price is $30, volatility is...
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You enter into a 6-month long forward contract on XYZ stock. The forward price is 50....
You enter into a 6-month long forward contract on XYZ stock. The forward price is 50. What is the payoff to your long forward if XYZ stock rises to 53 at 6 months? You enter into a 6-month short forward contract on XYZ stock. The forward price is 50. What is the payoff to your short forward if XYZ stock rises to 51 at 6 months? You purchase a European call option on XYZ stock with strike price 50. What...
You bought Stock A at a purchase price of: Call option strike price: Option expiration date:...
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13. The common stock of Xerox Corporation has been trading in a narrow price range for...
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State whether you agree or disagree with the following statement. Explain why. “A stock price has...
State whether you agree or disagree with the following statement. Explain why. “A stock price has been quite volatile lately, and the market's expectation is that high volatility will continue. You, on the other hand, expect the stock's price volatility to decrease significantly in the next three months. If you are not sure of the direction of the price change, you can speculate on this expectation by selling both call and put options (not just calls or just puts) on...
2. Exercise value and option price The value derived from exercising an option immediately is the...
2. Exercise value and option price The value derived from exercising an option immediately is the exercise value. No rational investor would exercise an option that is out-of-the-money, so the minimum exercise value is zero. The following table provides information regarding options on ABC Corp. stock. Because the stock's price is volatile, investors trade options to either hedge their positions or speculate on price movements. Investors can either buy options or "issue" new options, which is called writing options. The...
Derivatives Markets 3. You own a 6-month European put option on a XYZ Company's stock with...
Derivatives Markets
3. You own a 6-month European put option on a XYZ Company's stock with a strike price of $100. The spot price of the stock is $102, it has a return volatility of 30% and currently pays no dividends. The continuously compounded risk free rate of interest is 3%. Using Black-Scholes you calculate the value of your put option to be $6.84. Now you have just learned the company is considering paying a one-time dividend in 3 months...
2. Exercise value and option price The value derived from exercising an option immediately is the...
2. Exercise value and option price The value derived from exercising an option immediately is the exercise value. No rational investor would exercise an option that is out-of-the-money, so the minimum exercise value is zero. The following table provides information regarding options on ABC Corp. stock. Because the stock's price is volatile, investors trade options to either hedge their positions or speculate on price movements. Investors can either buy options or "issue" new options, which is called writing options. Consider...
You enter into a 6-month long forward contract on XYZ stock. The forward price is 50. What is the payoff to your long forward if XYZ stock rises to 53 at 6 months? You enter into a 6-month short forward contract on XYZ stock. The forward price is 50. What is the payoff to your short forward if XYZ stock rises to 51 at 6 months? You purchase a European call option on XYZ stock with strike price 50. What...
You bought Stock A at a purchase price of: Call option strike price: Option expiration date: Price of call option: $25 $35 June 30, 2020 $5 Stock goes up to $50 Stock goes down to $5 A. Profit/Loss on stock if sell now B. Profit/Loss on call option if sell now All other things being equal, would you expect the price of the call option to be higher or lower than $5 for a stock that is identical to Stock...
2. Exercise value and option price The value derived from exercising an option immediately is the exercise value. No rational investor would exercise an option that is out-of-the-money, so the minimum exercise value is zero. The following table provides information regarding options on ABC Corp. stock. Because the stock's price is volatile, investors trade options to either hedge their positions or speculate on price movements. Investors can either buy options or "issue" new options, which is called writing options. The...
Derivatives Markets
3. You own a 6-month European put option on a XYZ Company's stock with a strike price of $100. The spot price of the stock is $102, it has a return volatility of 30% and currently pays no dividends. The continuously compounded risk free rate of interest is 3%. Using Black-Scholes you calculate the value of your put option to be $6.84. Now you have just learned the company is considering paying a one-time dividend in 3 months...
2. Exercise value and option price The value derived from exercising an option immediately is the exercise value. No rational investor would exercise an option that is out-of-the-money, so the minimum exercise value is zero. The following table provides information regarding options on ABC Corp. stock. Because the stock's price is volatile, investors trade options to either hedge their positions or speculate on price movements. Investors can either buy options or "issue" new options, which is called writing options. Consider...
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