1. You think MBB stock has potential for an upward move in price. You have no position whatsoever in the stock now. You would like to take opportunity of any up movement in price but want to strictly limit your downside risk. MBB stock price now is RM 12.00. a. Given the information below, outline TWO possible appropriate strategies. For each strategy, • State the position • Graph the strategy • Outline the risk profile, and • State the maximum profit, maximum loss, and break-even point(s). 30-day calls 30-day put 11 call @ 1.55 11 put @ 0.25 12 call @ 0.70 12 put @ 0.45 12 call @ 0.22 13 put @ 1.40 b. From a cost viewpoint, which is the best strategy? explain c. What are the recommended options strategies when you expect the market has extreme (high) volatility? explain
1. You think MBB stock has potential for an upward move in price. You have no position whatsoever in the stock now. You would like to take opportunity of any up movement in price but want to strictly limit your downside risk. MBB stock price now is RM 12.00. a. Given the information below, outline TWO possible appropriate strategies. For each strategy, • State the position • Graph the strategy • Outline the risk profile, and • State the maximum profit, maximum loss, and break-even point(s). 30-day calls 30-day put 11 call @ 1.55 11 put @ 0.25 12 call @ 0.70 12 put @ 0.45 12 call @ 0.22 13 put @ 1.40 b. From a cost viewpoint, which is the best strategy? explain c. What are the recommended options strategies when you expect the market has extreme (high) volatility? explain
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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1. You think MBB stock has potential for an upward move in price. You have no position whatsoever in the stock now. You would like to take opportunity of any up movement in price but want to strictly limit your downside risk. MBB stock price now is RM 12.00.
a. Given the information below, outline TWO possible appropriate strategies.
For each strategy,
• State the position
• Graph the strategy
• Outline the risk profile, and
• State the maximum profit, maximum loss, and break-even point(s).
| 30-day calls | 30-day put |
| 11 call @ 1.55 | 11 put @ 0.25 |
| 12 call @ 0.70 | 12 put @ 0.45 |
| 12 call @ 0.22 | 13 put @ 1.40 |
b. From a cost viewpoint, which is the best strategy? explain
c. What are the recommended options strategies when you expect the market
has extreme (high) volatility? explain
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