Question 6 (Chapter 12) Assume that put options on a stock with strike prices of $45 and $50 cost $5 and $9, respectively... a) How can these options be used to create a bull spread? b) Construct a table that shows the payoff of the bull spread and the payoff of its individual components. c) Construct a table that shows the profit for the bull spread.
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- Which of the following techniques is used to value stock options? a. Black-Scholes method b. Zero-coupon method c. Weighted-average method d. Expected earnings method1. (Please make it quick) Draw payoff diagrams of the following portiolios as functions of the stock price ST. Show clearly the payoff from each individual security. Make sure to preserve the prices/values/premia appropriately, which are given as follows: Strike price K1 = 50 K2 = 75 K3 = 100 Price of the call 9 7 4 Price of the put 3 6 8Suppose that put options on a stock with strike prices $30 and $35 cost $4 and $7, respectively. What is the profit of a bull spread when stock price at maturity is above $35? Select one: a. -3 b. 0 C. 32 d. 2 e. 3 €
- An investor wants to follow a spread strategy by buying a put for 6$ with a strike price of 95$ and writing a put for 4$ with a strike price of 90$. a. Draw the graph of strategy payoffs and profits b. Find the equilibrium price of this strategy (the equilibrium price is the market price of the stock where the profit is 0) c. What is the maximum profit and loss from this strategy?a. Explain how and why an increase in each of the following affects the prices of both call and putoptions, holding all other variables constant: i. The current stock price ii. The strike pricea. Describe how the Black-Scholes Call option formula can be used to make an inference about the variance of the return on a stock. b . Explain how the earnings and dividends approaches to stock valuation are equivalent.
- Three call options on a stock have the same expiration date and strike prices of $55, $60, and $65. The market prices are $8, $5, and $3, respectively. Explain how a butterfly spread can be created. Construct a table showing the profit from the strategy. For what range of stock prices would the butterfly spread lead to a loss?Three put options on a stock have the same expiration date and strike prices of $55, $60, and $65. The market prices are $3, $5, and $8, respectively. Explain how a butterfly spread can be created. Draw a profit diagram of your strategy to communicate the range of stock prices that the butterfly spread would lead to a loss. (When you draw a profit diagram, please, do consider option premia.What impact does each of the followingparameters have on the value of a call option?(1) Current stock price
- Call options on a stock are available with strike prices of $15, $17.5 and $20 before expiration date. The call premiums for each are $4, $2 and $0.5 respectively. Explain how the options can be used to create a butterfly spread. A. Construct a table showing how profit varies with stock price for the butterfly spread. B. Plot the profit with stock price for the butterfly spread. List the profit formula for each trend.If put A has T = 0.5, X = 50, sigma = 0.2, and a price of 10, and put B has T = 0.5, X = 50, sigma = 0.2, and a price of 12, which put is written on a stock with a lower price (and why)?Which of the following describes delta? O The ratio of the option price to the stock price None of these O The ratio of a change in the option price to the corresponding change in the stock price The ratio of a change in the stock price to the corresponding change in the option price O The ratio of the stock price to the option price ◄ Previous Next ▸