4. a. Suppose you enter into a short 6-month forward position at a forward price of...
(1 point) 1) Suppose you enter into a short 6-month forward position at a forward price of $45. What is the payoff in 6 months for prices of $33, $39, $45, $49, $53 ? When price is $33, the payoff is $ When price is $39, the payoff is $ When price is $45, the payoff is $ When price is $49, the payoff is $ When price is $53, the payoff is $
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...
Problem 1.4.2. (Long put vs short forward) You are given: (6) The current price of a 100-strike 9-month European put option is 12. (ii) A 9-month forward has a forward price of 105 (iii) The continuously compounded risk-free interest rate is 3% Caleulate the stock price after 9 months such that the long put option and the short forward contract have the same profit.
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."...
You simultaneously write a put and buy a call, both with strike prices of $50, naked, i.e., without any position in the underlying stock. What are the expiration date payoffs to this position for stock prices of $40, $45, $50, $55, and $60? (Negative amounts should be indicated by a minus sign. Leave no cells blank- be certain to enter "0" wherever required. Omit the "S" sign in your response.) Stock Call Payoff Total Payof Price $40 $ $45 $...
The 3-month forward price is 50. The put option premium with a strike price 52 is 3 and the put option matures in 3 months. The risk-free interest rate is 4% p.a., compounded quarterly. The stock pays no dividend. What is the price of a call option with a strike of 52 and matures in 3 months?
5. (a) Explain the differences between a forward contract and an option. [2] (b) An investor has taken a short position in a forward contract. If Sy is the price of the underlying stock at maturity and K is the strike, what is the payoff for the investor? Does the investor expect the underlying stock price to increase or decrease? Explain your answer. (2) (c) (i) An investor has just taken a short position in a 6-month forward contract on...
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...
Suppose that you have taken a long position on a put option. The strike price is $125, and the option premium / price is $10. When the option expires, the value of the underlying asset is $90. What is your pay-off and profit / loss?
Suppose that you have taken a short position on a call option. The strike price if $55, and the option premium / price is $5. When the option expires, the value of the underlying asset is $54. What is your pay-off and profit / loss?