Please correct answer and don't use hand raiting NOTE: ASSUME Ris free rate of 0; 252 trading days in a year; and Normal distribution for all questions.Delta and Gamma with back ratio spreadUnderlying trading at 6000. You want to have a position of 100 CALL front ratio spread using CALLoptions with seven weeks before expiration. In particular, you want toLong 200 contracts of 35 delta CALLShort 300 contracts of 25 delta CALLAnnual IV for both legs is 1000.a. Identify the strike for 35 delta and 25 delta CALL respectivelyb. What is the delta for your overall call front ratio position?c. What is the gamma and theta value of your front ratio position?

Step 1: Determine the Strike Prices for Delta LevelsTo ascertain the strike prices for the 35-delta…

Answered: NOTE: ASSUME Ris free rate of 0; 252…

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

See similar textbooks

Similar questions

A strategy consists of buying a market index product at $830 and longing a put on the index with a strike of $830. If the put premium is $18.00 and interest rates are 0.5% per month, compute the profit or loss from the long put position ONLY in 6 months if the market index is $810. $1.36 loss $1.46 gain $2.80 loss $3.45 gain
Suppose the DJIA stands at 24,200. You want to set up a long straddle by purchasing 100 calls and an equal number of puts on the index, both of which expire in three months and have a strike of 242. The put price is listed at $4.25 and the call sells for $5.25. a. What will it cost you to set up the straddle, and how much profit (or loss) do you stand to make if the market falls by 650 points by the expiration dates on the options? What if it goes up by 650 points by expiration? What if it stays at 24,200? b. Repeat part a, but this time assume that you set up a short straddle by selling/writing 100 Oct 242 puts and calls. c. What do you think of the use of option straddles as an investment strategy? What are the risks, and what are the rewards? a. To set up the long straddle, it will cost (Round to the nearest dollar. Enter a positive number for the cost.) If the market on the long straddle falls by 650 points by the expiration dates on the options, the profit (or loss) is $ (Round to…
The following parameters are provided:S = $40, K= $45, r = 5% (continuously compounded), Time to maturity = 6 months, p = $6, Using put-call parity, the price of the call is $1.92 $2.11 $2.47 $2.78
Need typed answer only.Please give answer within 45 minutes
Suppose you enter into a short 6-month forward position at a forward price of $100. What is the payoff in 6 month for the underlying prices of $150 QUESTION 4 Suppose you enter into a long 6-month forward position at a forward price of $50. What is the payoff in 6 month for the underlying prices of $50
A 3 month call cost 1.44 with a strike of 25.6 on a stock which costs $20. If the risk free rate is 2.5% what should be the cost of a 3 month put with a strike of 25.6? Please use 5 decimal places in your response. Thanks
Suppose the initial margin on heating oil futures is $20, 200, the maintenance margin is S 16, 500 per contract, and you establish a long position of 12 contracts today, where each contract represents 27,000 gallons. Tomorrow, the contract settles down 5.07 from the previous day's price. What is the maximum price decline on the contract that you can sustain without getting a margin call?
Suppose the initial margin on heating oil futures is $8,400, the maintenance margin is $7,200 per contract, and you establish a long position of 10 contracts today, where each contract represents 42,000 gallons. Tomorrow, the contract settles down $0.04 from the previous day’s price. Are you subject to a margin call? Why or why not? What is the maximum price decline on the contract that you can sustain without getting a margin call?
The below table shows the list of prices for puts expiring in 30 days (T = 1/12). Using the put option with a strike price of $236, estimate the level of the VIX index. K p 230 2.14 231 2.37 232 2.62 233 2.91 234 3.23 235 3.60 236 4.01 237 4.47 238 4.95 Other parameters you'll need: s0 = $234.35r = 0.74%T = 1/12 years (required precision 0.01 +/- 0.01)
Price a 3 month call using a one step binomial tree where the risk free rate is 1.00%. Where S0 is $50, the strike price is 52 and it can increase or decrease by 10% with equal probability.
A put currently has a strike price of $54 and a maturity of six months. what will be the profit/loss in each scenario to an investor who buys the put for $6.40? (a)$44 (b)$49 (c)$54 (d)$59 (e)$64
Price a 3 month call using a one step binomial tree where the risk free rate is 1.00%. Where S0 is $50, the strike price is 52 and it can increase or decrease by 10% with equal probability. The correct answer is 1.5337 Please show your work and explain?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS