Suppose the current ABC stock price is $50 and an option trader speculates this price will fall below $50 soon. Which set of actions is the best strategy for him? buy the Stock and write a $50 call O buy $40 call and short $60 call short $40 put and buy $60 put O buy $50 call and buy $50 put

Suppose the current ABC stock price is $50 and an option trader speculates this price will fall below $50 soon. Which set of actions is the best strategy for him? buy the Stock and write a $50 call O buy $40 call and short $60 call short $40 put and buy $60 put O buy $50 call and buy $50 put

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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suppose that you have a call option that is at 1.30. it has a Delta of .35 a Gamma of .06 a Theta of .02 assume Vega is constant. today the stock moves from $45 to $46. the next day (day 2) the stock moves another dollar to $47. What is the value of your call option at the end of day two A. $2.02 B. $1.69 C. $1.73 D. $1.98
Need asap... Suppose that you have a call option that is at 1.30. it has a Delta of .35 a Gamma of .06 a Theta of .02 assume Vega is constant. today the stock moves from $45 to $46. the next day (day 2) the stock moves another dollar to $47. What is the value of your call option at the end of day two? A. $2.02 B. $1.69 C. $1.73 D. $1.98
You have six investment options based on the following three given stocks (X, Y, and Z): State of Economy Boom Normal Bust Probability Rx 0.2 0.5 0.3 Option 1 (X only) Option 2 (Y only) Option 3 (Z only) Option 4 (X and Y) Which one of the following investment options has the lowest risk? (Try to answer the question without any calculations.) Option 5 (X and Z) Ry Option 6 (Y and Z) Rz 2% 20% 30% 9% 12% 17% 27% -2% -5%
F2.
Consider the following portfolio. You write a put option with exercise price $90 and buy a put with the same expiration date with exercise price $95. a. Plot the value of the portfolio at the expiration date of the options. b. Now, plot the profit of the portfolio. Which option must cost more?
In follow an Ito process with >0, a stock is worth $80 today, if the price of an option that pays the holder $2 exactly the first time the stock price reaches $200, what is the price of an option? Show all calculation.
Please answer B & C
A trader creates a long butterfly spread from call options with strike prices $60, $65, and $70 by trading a total of 400 options. The call options are worth $11, $14, and $18. What is the maximum net loss (after the cost of the options is taken into account)? Select one alternative: O $300 O $100 O $400 O $200
Suppose you own a put option on Apple stock with a strike price of $150. Suppose it is the expiration date of the option and the current stock price of Apple is $75. What payoff will you receive from making an optimal exercise decision on your option? 1. -$75 2. $0 3. $75
21. If Fincorp stock trades in a dealer market with bid price of 55.25 and asked price of 55.50, a) Suppose you have submitted an order to your broker to buy at market. At what price will your trade be executed? b) Suppose you have submitted an order to sell at market. At what price will your trade be executed? c) Suppose you have submitted a limit order to sell at $55.62. What will happen? d) Suppose you have submitted a limit order to buy at $55.37. What will happen?
Use the binomal option pricing model to estimate the Call price. Stock price (S) $120.00 Stock price up (Su) $170.00 Stock price down (Sd) $50.00 Strike price (K) $120.00 rf 1.0% Call price up (Cu) Call price down (Cd) D PV(B) Call price (C)
Only typing. .... . A strip is a variation of a straddle involving two puts and one call. Construct a short strip using the August 170 options. The price of the call option is $8.10 and the price of the put option is $6.75. Hold the position until the options expire. Determine the profits and graph the results. Identify the breakeven stock prices at expiration and the minimum profit.

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