7. (past UoL exam) The current price of shares in Eco Power is £100 per share. The following table shows prices of 1-year options on Eco Power. Eco Power September options Strike Price 90 100 110 CALL 14 6 4 PUT 3 6 13 Study carefully the option prices in the table. Can you exploit these prices to make arbitrage profits? Explain.

7. (past UoL exam) The current price of shares in Eco Power is £100 per share. The following table shows prices of 1-year options on Eco Power. Eco Power September options Strike Price 90 100 110 CALL 14 6 4 PUT 3 6 13 Study carefully the option prices in the table. Can you exploit these prices to make arbitrage profits? 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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The Black-Scholes model is used to value call options on the stock of National Co. The following information was identified:· The share price is P43.· The option matures in 6 months· The risk-free rate is 2%.· Price of the option is at P43.What is the exponent of “e” for in computing the value of the call option using the Black-Scholes model?
Refer to the stock options on Microsoft in the Figure 2.10. Suppose you buy a November expiration call option on 100 shares with the excise price of $140. Required: a-1. If the stock price at option expiration is $144, will you exercise your call?a-2. What is the net profit/loss on your position? (Input the amount as a positive value.)a-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) b-1. Would you exercise the call if you had bought the November call with the exercise price $135?b-2. What is the net profit/loss on your position? (Input the amount as a positive value.)b-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)c-1. What if you had bought the November put with exercise price $140 instead? Would you exercise the put at a stock price of $140?c-2. What is the rate of return on your position? (Negative…
Assuming that a September put option to buy a share for $100 costs $4.50 and is held until September. Under what circumstances will the holder of this option make a profit? Under what circumstances will the option be exercised? Draw a diagram showing how the profit on a long position in the option depends on the stock price at the maturity of the option.
Suppose that a June call option to buy a share for $65 costs $3.5 and is held until June. Under what circumstances will the holder of the option make profit Under what circumstances will the option be exercised? Draw a diagram showing how the profit on a long position in the option depends on the stock price at the maturity of the option.
Assume a stock with an option with the information as follows. • Stock purchased price was $113.• Call option on the stock was purchased at $4. • Call option has strike price at $115.• the stock price is $117on expiration date Please explain the Call Options Payoff Diagrams below, why it plot like this (please explain step by step) . Thank you for your answering
A4)
Suppose you wrote a European put option on RDNW with an exercise of $30 and premium of $2.0. What would be your profit (per share) if the stock price at the expiration date is $26? Your Answer: Answer
Covered Calls Please help me.
Q1. You have purchased a call option on Johnson & Johnson common stock. The option has an exercise price of $57.50 and J & J’s stock currently trades at $58.93. The option premium is $2.17 per contract. Calculate your net profit on the option if J & J’s stock price rises to $62.50 and your exercise the option. Calculate your net profit on the option if J & J’s stock price falls to $58.00 and your exercise the option. If J & J’s stock price falls to $58.00 show that it is more profitable to exercise than not exercise the option you have purchased.
Use the data in the figure 20.1 and calculate thepayoff and the profits for investments in each ofthe following January expiration options, assumingthat the stock price on the expiration date is $125.a. Call option, X=$120b. Put option, X=$120c. Call option, X=$125d. Put option, X=$125e. Call option, X=$130f. Put option, X=$130
An investor owns Citibank stock at $75. They want to sell some 3-month out- of-the-money call options against their position. STRIKES 72.50 75 77.50 CALL PRICE 5.60 4.12 2.84 Create a table showing the profit and loss for underlying trading at 70, 72.5, 75, 77.5, 80 and 82.5 for all the positions and the option strategy. Draw an expiry pay-off diagram, using the prices in the table.
1

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