Calculate the leverage from holding a call option with a closing price of $3 on February 18 and a closing price of $6.5 on April 6. The stock price on February 18 was $22 and closed at $27 on April 6.

Calculate the leverage from holding a call option with a closing price of $3 on February 18 and a closing price of $6.5 on April 6. The stock price on February 18 was $22 and closed at $27 on April 6.

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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A collar is established by buying a share of stock for $54, buying a 6-month put option with exercise price $47, and writing a 6-month call option with exercise price $61. On the basis of the volatility of the stock, you calculate that for a strike price of $47 and expiration of 6 months, N(d1) = 0.7298, whereas for the exercise price of $61, N(d1) = 0.6374. Required: What will be the gain or loss on the collar if the stock price increases by $1? What happens to the delta of the portfolio if the stock price becomes very large? What happens to the delta of the portfolio if the stock price becomes very small?
A put with a strike price of $50 was sold at $11 when the price of the stock was $48. What was the time value of the put at expiration?
Consider a call option on one share of BP with a strike price of $70 and exercise time 1 quarter (3 months). Suppose the current stock price for BP is S(0) = $65 per share. Suppose further that A(0) = $100, A(1) = $102 and two possible prices for S(1) are S $74 with probability 0.5, S(1) = $66 with probability 0.5. Evaluate the expected returns E(Ks) and E(Kc) for the stock and the option.
A stock is currently priced at 43.75 when options are about to expire. What is the net profit of a CALL option with a strike price of 45 for the BUYER of the option if the premium paid was 1.75? (per share) Group of answer choices 1.75 0.00 -2.25 -1.75 45.00
1. For each of the following cases, calculate (i) the cashflow paid or received today on entering the position, (ii) the gross payoff at expiry, and (iii) the net payoff from your option trading All options are European style and cover 100 shares in the underlying asset. a) You enter a long call option with a strike price of $6 and premium of $2.30. At expiry, the share price is $7.80. b) You enter a long call option with a strike price of $9 and premium of $0.80. At expiry, the share price is $7.90. c) You enter a short call option with an exercise price of $5 and premium of $0.70. The share price at expiry is $5.40. d) You enter a short call option with an exercise price of $5 and premium of $0.70. The share price at expiry is $4.90. e) You buy a long - put option with a strike price of $10 for a premium of $ 1.20. At expiry, the share price is $8.50. f) You write (i. e., short) a put option with strike price $7 for a premium of $0.60. At expiry, the share price is $5.
Which of the following call options on XYZ stock is most valuable? 1. Strike price = $ 40, 3 months to expiration 2. Strike price = $ 40, 3 months to expiration 3. Strike price = $ 50, 6 months to expiration 4. Strike price = $ 50, 6 months to expiration
A stock is currently priced at $61 and has an annual standard deviation of 41 percent. The dividend yield of the stock is 2.8 percent, and the risk-free rate is 4.8 percent. What is the value of a call option on the stock with a strike price of $58 and 52 days to expiration? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Call option $
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
A stock is currently selling for $39. In one period, the stock will move up by a factor of 1.29 or down by a factor of .53. A call option with a strike price of $50 is available. If the risk-free rate of interest is 2.5 percent for this period, what is the value of the call option?
You currently have a position on a covered call. A covered call is a combination of a long stock and a short call on the same stock. You purchased the stock at the price of $50 and short the call at the premium of $3. The call option has an exercise price of $55. If the stock price increases to $54, what is your net income?

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