Explain the following terms, In-the money option and At-the-money option.

Q: What are the 4 basic option positions? Please draw their Profit/Loss Profile.

A: Option position means any open Long or short position in options derivatives. In options, we can buy…

Q: Briefly explain the pay-off structure of futures and options contract. Also make it more clear with…

A: Futures are the derivative contract where you get the rights as well as the obligations. For example…

Q: Graph a call to buy option and explain how its payoff is given. Explain when it is in the money, at…

A: The Moneyness of an option is categorized under three categories namely, In-the-money (ITM),…

Q: What impact does each of the followingparameters have on the value of a call option?(1) Current…

A: Call option: Call options are financial agreements that give the holder of option the right, but not…

Q: Explain the Selling  the Call Option, Buying the Put Option and Buying  the Underlying Stock.

A: Selling  the Call Option-When you sell a call option, you're giving someone else the right but not…

Q: What impact does each of the followingparameters have on the value of a call option?(3) Option’s…

A: It is a contract to purchase a financial asset from one party and sell it to another party on an…

Q: IF YOU WILL INVEST IN ONE OF THE INVESTMENT OPTIONS, WHAT WOULD IT BE AND WHY? ELABORATE YOUR ANSWER

A: Out of the investment options available, the expected return of equity is higher than other…

Q: What are the five variables that affect the value of an option, and how do changes in each of these…

A: Option price refers to the price at which buyers purchase the stock or have the right to buy or sell…

Q: Discuss the difference between forward and futures contracts, focusing on the pros and cons of each.

A: Hedge:   An investment strategy that is formed to reduce the risk of the adverse price movement of…