The hedge ratio of an at-the-money call option on IBM is 0.37. The hedge ratio of an at-the-money put option is −0.63. What is the hedge ratio of an at-the-money straddle position on IBM? Note: Negative answer should be indicated by a minus sign. Round your answer to 2 decimal places.

The hedge ratio of an at-the-money call option on IBM is 0.37. The hedge ratio of an at-the-money put option is −0.63. What is the hedge ratio of an at-the-money straddle position on IBM? Note: Negative answer should be indicated by a minus sign. Round your answer to 2 decimal places.

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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Question

The hedge ratio of an at-the-money call option on IBM is 0.37. The hedge ratio of an at-the-money put option is −0.63. What is the hedge ratio of an at-the-money straddle position on IBM?

Note: Negative answer should be indicated by a minus sign. Round your answer to 2 decimal places.

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tHE CORRECT OPTION IS C but what is wrong with the last statement? The short position in the same call option has a zero value for all stock prices equal to or less than the exercise price. - Please explain how this statement is true? please give a detailed explanation and in simple terms.
Dd.85.
3 You are given the following information on some company's stock, as well as the risk- free asset. Use it to calculate the price of the call option written on that stock, as well as the price of the put option. (HINT: You should use the Black-Scholes formula!) (Do not round intermediate calculations and round your final answers to 2 decimal places, e.g., 32.16.) Today's stock - $77 price = Exercise price = $75 Risk-free rate = Option maturity = 5 months Standard deviation of annual stock returns Call price Put price $ $ 3.4% per year, compounded continuously = 59% per year 3.61 x 0.56 X 1
Consider a call option whose maturity date is T and strike price is K. At any time t < T, is it always the case that the call option's price must be greater than or equal to max(St – K,0), where St is the stock price at t? (Your answer cannot be more than 30 words. Answers with more than 30 words will not be graded.)
Consider a chooser option that you may choose whether the option is a put (with expiration T = 2) or a call (with expiration T = 2) at a specified time to = 1. Moreover, we have So 10, o = 0.2, r = Question: What is the price for this chooser option? 0.05, K = 9.
Consider a forward contract on a stock that pays dividends at specific times ti, where 0 < t1 < t2 < ... < tn < T. Suppose that the dividend is a fixed amount: Di at fixed times ti. Show that in this case, the forward contract price is given by
Suppose that the current price of an asset is $100. After three months, there are two possible values for the asset price, and after six months there are three, as follows: S++ = 121 s+ = 110 So = 100 st- = 92 S- = 90 S-- = 81 The annual risk-free rate of interest is 2%.
The profit (loss) experienced on option B is $ ? (Round to the nearest dollar. Enter a negative number for loss.) The profit (loss) experienced on option C is $ ? (Round to the nearest dollar. Enter a negative number for loss.) The profit (loss) experienced on option D is $ ? (Round to the nearest dollar. Enter a negative number for loss.) The profit (loss) experienced on option E is $ ? (Round to the nearest dollar. Enter a negative number for loss.) How do I find the calculations for these questions?
PLEASE ANSWER CORRECTLY ALL THE FALLOWING ******MAKE SURE YOU DONT NOT GIVE ME THE WRONG ANSWERS
What does it mean to assert that the delta of a call option is 0.7? How can a short position in 1,000 options be made delta neutral when the delta of each option is 0.7?
A. An option is trading at $5.03. If it has a delta of -.56, what would the price of the option be if the underlying increases by $.75? What would the price of the option be if the underlying decreases by $.55? B. What type of option is this and how? C. With a delta of -.56, is this option ITM, ATM or OTM and how?
Data: S0 = 120; X = 126; 1 + r = 1.05. The two possibilities for ST are 150 and 102. Required: a-1. The range of S is 48 while that of C is 24 across the two states. What is the hedge ratio of the call? Note: Round your answer to 2 decimal places. a-2. Calculate the value of a call option on the stock with an exercise price of 126. (Do not use continuous compounding to calculate the present value of X in this example because we are using a two-state model here; the assumed 5% interest rate is an effective rate per period.) Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

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