Ba short position in a fulures coedracdCsold a forward coetractD. purchased a forwand contracdE. purchased a call option on a futures contract19. You have taken a stock option position and, if the stock's price deops, you will get a levelgain no matter how far peices fall, but you could go bankrupt if the stock's price rises. You haveA. bought a call opeionB. bought a put optionC. written a call option.D. written a put option.E. written a straddle

Option is a derivative instrument which gives the buyer the right to buy or sell an asset at a…

Answered: Ba short position in a fulures coedracd…

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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Case:As a speculative investor, you can make profits by combining two option trades. Assume that you expect low volatility for the Delivery Hero share (currently standing at € 104.50). Combine two of the following four possible option trades, all related to Delivery Hero stock:- (1.) Long Call or (2.) Short Call as of 16.12.22, strike price € 105, option price € 5- (3.) Long Put or (4.) Short Put as of 16.12.22, strike price € 104, option price € 4. a) Which two of these four option trades are to be chosen?b) What is the maximum profit of the speculative investor in the example you have chosen?c) At which price or in which price range of the Delivery Hero share is the maximum profit achieved?d) In which price range is the speculative investor at all in the profit zone (i.e. where are the break-even points)?
PLEASE ANSWER CORRECTLY ALL THE FALLOWING ******MAKE SURE YOU DONT NOT GIVE ME THE WRONG ANSWERS
7. The cuurent market price of a share of BCE storck is $50 . If a call option on this stock has a strike price of $45 the call: a. is out of the money b. is in the money c. sells for a higher price than if the market price of BCE stock is $0 d. a and c. e. b and c
If a Put with strike X cannot be purchased in the market, what can you do to re-create or Buy a call, buy a stock and short X/(1+r) t-bills Buy a call, buy a stock and buy X/(1+r)' t-bills Buy a call, short a stock and short X/(1+r) t-bills O Short a call, short a stock and buy X/(1+r)' t-bills Buy a call, short a stock and buy X/(1+r)' t-bills Short a call, buy a stock and short X/(1+r)' t-bills Short a call, buy a stock and buy X/(1+r)' t-bills Short a call, short a stock and short X/(1+r)' t-bills
Question 5: Suppose that a March call option to buy a share for $50 costs $2.50 and is held until March. Under what circumstances will the holder of the 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.Plz explain it
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Question 1. Let St be the current price of a stock that pays no dividends. a)Let rbid be the interest rate at which one can invest/lend money, and roff be theinterest rate at which one can borrow money, rbid≤roff. Both rates are continuously compounded. Using arbitrage arguments, find upper and lower bounds for the forwardprice of the stock for a forward contract with maturity T > t. b)How does your answer change if the stock itself has bid price St,bid and offer price St,off?
Q.7 A stock XYZ Ltd. is trading at Rs. 650. Mr. Lalit is bullish on the stock but does not want to invest Rs. 650. He does a Long Combo. He sells a Put option with a strike price of Rs. 600 at a premium of Rs. 50.00 and buys a Call Option with a strike price of Rs. 700 at a premium of Rs. 45. Prepare a pay-off table by taking different closing of XYZ Itd. stock and present his profit or loss graphically. Also, discuss the Break even points of the strategy.
What's the key to profitable long call options? A. A large number of at-the-money call options. B. An optionable stock that goes up sufficiently within a certain period. C. An option position that breaks even early enough before expiration. D. In-the-money calls. 4
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5 Construct payoff tables or payoff diagrams on expiration to show what position in IBM puts, calls and/or underlying stock best expresses the investor's objectives described below. Assume IBM currently sells for $100. Make appropriate assumptions about the strike prices of options in each case. Ignore the cost of options. a/ An investor wants the position to be at least worth $75. Further the investor believes that the IBM stock price will go up but will at most reach $140.
What about for these? (b) Suppose you have purchased some GameStop shares on margin at $5per share. You ask your broker to put in a limit sell order at $7, anda stop loss order at $4.50.i. What will happen if the stock price falls to $4.50?ii. What will happen if the stock price rises to $7?iii. Now suppose you had instead short-sold your GameStop shares(as in the first part of the question). What instructions mightyou give to your broker to minimise your losses and lock in yourgains?

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