Suncor Energy Inc. (SU) shares are listed on the New York Stock Exchange. At 9:30 a.m. on January 14, 2016, these shares sold for $21.85 per share. The volatility on the returns of Suncor shares is approximately 24%. The following call and put option contracts were available for the months of January, February, and March: CALLS Strike/Expiry January 22, 2016 February 19, 2016 March 18, 2016 23 0.34 0.72 0.96 24 0.13 0.41 0.69 25 0.25 0.26 0.40 PUTS Strike/Expiry January 22, 2016 February 19, 2016 March 18, 2016 23 1.28 2.01 2.14 24 2.63 2.80 2.92 25 3.60 3.70 3.95 Each option contract involves 100 shares. The risk-free rates for these three expiration dates are 0.6%, 1%, and 1.2%. All three rates are continuously compounded. Given the information on Suncor shares and options above, construct a protective put using the 23-put with February expiration. Hold the protective put position until expiration. e. What is the maximum profit and maximum loss on this protective put?
Suncor Energy Inc. (SU) shares are listed on the New York Stock Exchange. At 9:30 a.m. on January 14, 2016, these shares sold for $21.85 per share. The volatility on the returns of Suncor shares is approximately 24%. The following call and put option contracts were available for the months of January, February, and March:
|
|
CALLS |
||
|
Strike/Expiry |
January 22, 2016 |
February 19, 2016 |
March 18, 2016 |
|
23 |
0.34 |
0.72 |
0.96 |
|
24 |
0.13 |
0.41 |
0.69 |
|
25 |
0.25 |
0.26 |
0.40 |
|
|
PUTS |
||
|
Strike/Expiry |
January 22, 2016 |
February 19, 2016 |
March 18, 2016 |
|
23 |
1.28 |
2.01 |
2.14 |
|
24 |
2.63 |
2.80 |
2.92 |
|
25 |
3.60 |
3.70 |
3.95 |
Each option contract involves 100 shares. The risk-free rates for these three expiration dates are 0.6%, 1%, and 1.2%. All three rates are continuously compounded.
Given the information on Suncor shares and options above, construct a protective put using the 23-put with February expiration. Hold the protective put position until expiration.
e. What is the maximum
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