Q: The current price of XYZ stock is $50, and two-month European call options with a strike price of…
A: Here, Current Price of the Stock is $50 Strike Price of the Stock is $51 which currently sells for…
Q: You are bullish on Unum stock. The current market price is $50 per share, and you have $4,000 of…
A: calculate gain and interest amount
Q: Suppose you think AppX stock is going to appreciate substantially in value in the next year. Say the…
A: The objective of the question is to calculate the rate of return for each of the three investment…
Q: Using Black-Scholes, the put option should be worth. Multiple Choice $0.53 $0.46 $9.57 $9.93 today.
A: An option is an agreement between two parties granting one the opportunity to buy or sell a security…
Q: The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past…
A: By using option trading, investors may benefit from a range of changes in the price of underlying…
Q: The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past…
A: Dear student, kindly check the answer in the explanation box below.Explanation:Part 1: Answer:Price…
Q: Suppose you believe that National Inc.’s stock price is going to decline from its current level of…
A: Put Option: It is the contract where a right is provided to the owner to sell a certain amount of…
Q: Currently you own no stock or options. Today's data for Green Corporation, where the call and put…
A: A put option would be exercised if the price of the stock at the time of expiration of the put…
Q: XYZ Corp. will pay a $2 per share dividend in 2 months. Its stock price currently is $72 per share.…
A: A call option is a financial contract that gives the holder the right, but not the obligation, to…
Q: The current price of a non-dividend-paying stock is $30. Over the next six months it is expected to…
A: The objective of this question is to calculate the risk-neutral probability of the stock price…
Q: e current stock price of Alcoco is $60, and the stock does not pay dividends. The instantaneous…
A: Call option delta shows how much will change in option prices with the change in value of assets in…
Q: Don't provide handwritten soluton. You are bullish on Telecom stock. The current market price is…
A: Trading on margin is a financial strategy where an investor borrows funds from a broker to purchase…
Q: Suppose that call options on ExxonMobil stock with time to expiration 6 months and strike price $87…
A: Let's break down the reasoning and calculations more clearly:### 1. Buying or Selling Call Options:-…
Q: (C) each. You have $10.000 to invest. You invest all the $10,000 in call options on Alphabet Inc.…
A: Current Stock price of Alphabet Inc. = 1000Cal Option having Exercise [rce $1000 is selling for…
Q: You would like to be holding a protective put position on the stock of XYZ Company to lock in a…
A: Value of share = $210It can increase by 10% or decrease by 10%T-bill rate or risk-free rate = 4%If…
Q: The current stock price of IBM is $64. A put option on IBM with an exercise price of $67 sells for…
A: The put-call parity refers to the relationship between the prices of the put and call options that…
Q: XYZ Corporation will pay a $2 per share dividend in two months. Its stock price currently is $80 per…
A: A call option is a financial contract that, before or on a designated expiration date, grants the…
Q: Straddle involves buying a European call and put with the same strike price and expiration date. A…
A: A straddle is an options trading strategy involving the simultaneous purchase of both a call option…
Q: A stock priced at $65 has three-month calls and puts with an exercise price of $55 available. The…
A: Here,Stock Price (S) is $65Strike Price (X) is $55Risk Free Rate (r) is 1.6%Call Premium is $3.91Put…
Q: You would like to be holding a protective put position on the stock of XYZ Company to lock in a…
A: The answer has been calculated in the spreadsheet given below, formulas used in the sheet have been…
Q: Suppose you had just gone long (purchased) on lot of Syarikat XYZ stock at a price of RM 15.00 each,…
A: Long position: Long position means we will buy stock now and sell them in future expecting the price…
Q: You are looking at the purchase of a put option. The stock is selling for $50. The exercise price is…
A: The question is to find pay off from put option position . Put option derivative contracts provides…
Q: You happen to be checking the newspaper and notice an arbitrage opportunity. The current stock price…
A: The put-call parity theorem explains a relationship between the price of put and call options of the…
Q: a. If the semiannual risk-free interest rate is 3%, what must be the price of a 6-month put option…
A: According to put call parity the price of call option and put option must be in equilibrium with…
Q: Suppose you think AppX stock is going to appreciate substantially in value in the next year. Say the…
A: Stock Price: This is the current price of the stock, denoted as S0, which is $80 in this…
Q: Required: a. How much would it cost to purchase if the desired put option were traded? (Do not round…
A: Value of share = $110 It can increase by 5% or decrease by 5% T-bill rate or risk-free rate = 4% If…
Q: The current stock price of Johnson & Johnson (J&J) is $56, and the stock does not pay dividends. The…
A: An option is an agreement between two parties wherein it gives an opportunity to buy or sell an…
Q: You opened a margin account with borrowing $50,000 from your broker a year ago. Your account started…
A: Borrowings = $50,000Initial Margin = 50%ABC Stock price = $50Maintenance margin = 35%Interest rate =…
Q: Please help solve in Excel. Suppose there is a stock that has a current price of $89.50. The risk…
A: Implied volatility is a key concept in options trading. It is a measure of the market's expectation…
Q: An investor is considering purchasing Apple’s stock for $150 per share. The investor is optimistic…
A: Strike price = $150 Option premium = $3.95 Breakeven value = ? Breakeven value on the call option…
Q: The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past…
A: Part A: Price of a 6-month Put Option To find the price of a 6-month put option using the…
Q: The stock price of ABC changes only once a month: either it goes up by 20% or it falls by 16.7%. Its…
A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: You work on a proprietary trading desk of a large investment bank, and you have been asked for a…
A: Option Market is a Stock Market Strategy. Under which investor will not purchase the shares of the…
Q: Suppose you had just gone long (purchased) on lot of Syarikat XYZ stock at a price of RM 15.00 each,…
A: Current Stock price is RM 15.00 Cost of 3-months put option us RM0.15 Put option is ATM(at the…
Q: Suppose you had just gone long (purchased) on lot of Syarikat XYZ stock at a price of RM 15.00 each,…
A: Financial derivatives known as call options and put options provide the holder the right, but not…
Q: ou would like to be holding a protective put position on the stock of XYZ Company to lock in a…
A: Protective put options are the shield provided to the owner of the stocks to ensure the selling…
Q: The common stock of the P.U.T.T. Corporation has been trading in a narrow price range for the past…
A: Options are derivative instruments. Options are used to hedge the risk of fluctuation in the prices…
Q: On November 1, an analyst who has been studying a firm called Computer Sciences believes that the…
A: Effective return refers to the minimum return to be earned by investors on the initial investment…
Q: You would like to be holding a protective put position on the stock of XYZ Company to lock in a…
A: Value of share = $210It can increase by 10% or decrease by 10%T-bill rate or risk-free rate = 4%If…
Q: The common stock of the XYZ Co. has been trading in a narrow range around $40 per share for months,…
A: Put call parity relation is given as shown below. C+PVX=P+SHere,Price of call or call premium=CPrice…
Q: A.K. Scott’s stock is selling for $37 a share. A 3-month call on this stock with a strike price of…
A: The put-call parity is a term used to describe the relationship between call and put options in…
Q: Optival’s stock is currently trading at $60 per share with a historical volatility of 20%. The…
A: Given: Particulars Spot price $60.00 Standard deviation 20% Risk free rate 4% Exercise…
Q: You are bullish on XYZ stock. The current market price is $100 per share, and you have $10,000 of…
A: Margin call refers to the amount which is deficit to maintain the maintenance margin account.
Q: A stock's current price is $20 and a 3-month call with a strike price of $22 sells for $2. You have…
A: Call option-This is a form of a derivative contract. Under this contract, the call option buyer has…
Q: The price of Newgen Corp. stock will be either $94 or $103 at the end of the year. Call options are…
A: A call option is a derivative instrument allowing the holder to purchase the associated asset at a…
Momo, a fast-growing company, will make an earnings announcement three months from now. But you do not know whether it will be positive or negative (i.e., the stock price will go up or down). The current price of the stock is $30 per share. A three-month call with an exercise price of $30 costs $5. A put with the same exercise price and expiration date costs $5.
a. What would be a simple options strategy to bet on the stock price volatility?
Step by step
Solved in 2 steps
- Suppose you think AppX stock is going to appreciate substantially in value in the next year. Say the stock's current price, Sø. is $75, and a call option expiring in one year has an exercise price, X, of $75 and is selling at a price, C, of $21. With $21,000 to invest, you are considering three alternatives. a. Invest all $21,000 in the stock, buying 280 shares. b. Invest all $21,000 in 1,000 options (10 contracts). c. Buy 100 options (one contract) for $2,100, and invest the remaining $18,900 in a money market fund paying 6% in interest over 6 months (12% per year). What is your rate of return for each alternative for the following four stock prices in 6 months? (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round the "Percentage return of your portfolio (Bills + 100 options)" answers to 2 decimal places.) The total value of your portfolio in six months for each of the following stock prices is: Stock Price All…Suppose you had just gone long (purchased) on lot of Syarikat XYZ stock at a price of RM 15.00 each, for a total investment of RM 15,000. You believe this stock has long term potential but wish to protect yourself from any short-term downside movement in price. Suppose 3-month, at-the-money put options on Syarikat XYZ stocks are being quoted at RM 0.15 or 15 sen each or RM 150 per lot (RM 0.15 x 1,000). a. What would be the appropriate options strategy to hedge the long stock position? b. Show (in a table) the payoff to the combined position for a given range of stocks prices at options maturity in 3-months. c. Draw the payoff profile of combined positions.Suppose you believe that BVC Inc.’s stock price is going to decline from its current level of P92.50 sometime during the next 5 months. For P350.25 you could buy a 5-month put option giving you the right to sell 100 shares at a price of P94.00 per share. If you bought a 100-share contract for P350.25 and BVCl Inc.’s stock price actually dropped to P75.00, what would be your net profit (after transactions costs but before taxes)? Format: 1,111.11
- Learn Corp. (Ticker: LC), an education technology company, is considered to be one of the least risky companies in the education sector. Investors trade call options for Learn Corp., whose stock is currently trading at $18.00. Suppose you are interested in buying a call option with a strike price of $25.20 that expires in 6 months. (Assume that you get the option for free!) Based on speculations and probability analysis, you compute and collect the following information for your price analysis of the option: • For LC’s options, time until expiration (t) is taken as 0.50 year (6 months/12 months). • LC’s stock could go up by a factor of 1.50 (u). • LC’s stock could decline by a factor of 0.60 (d). At this time, LC’s stock price is , and if you exercised the option, your payoff would be . Therefore, if the option is out-of-the-money, you exercise the option. Calculate the ending stock price of Learn Corp. for both possible outcomes and the payoff in both…The current price of a non-dividend-paying biotech stock is $140 with a volatility of 25%. The risk-free rate is 4%. For a 3-month time step: (a) What is the percentage up movement? (b) What is the percentage down movement? (c) What is the probability of an up movement in a risk-neutral world? (d) What is the probability of a down movement in a risk-neutral world? Use a two-step tree to value a 6-month European call option and a 6-month European put option. In both cases the strike price is $150. Answer: (For (a) to (d), answer XX.XX if the answer is XX.XX% or 0.XXXX; for the option prices: please round you answers to the second decimal places.) (a, (c) (d) Price of the Call: Price of the Put: % % % %Suppose you have $28,000 to invest. You're considering Miller-Moore Equine Enterprises (MMEE), which is currently selling for $40 per share. You notice that a put option with a $40 strike is available with a premium of $2.80. Calculate your percentage return on the put option for the six-month holding period if the stock price declines to $36 per share. (Do not round intermediate calculations. Enter your 6-month return as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Percentage return %
- Suppose that you plan to invest in stock A, because you believe that stock A will appreciate in the next 6 months. The stock current price is $100, and a call option on stock A expiring in 6 months has an exercise price of $100 selling at $15 per option. And you have $7500 in hand to invest the following three strategies: A: Invest entirely in stock A. B: Invest entirely in call option on stock A. C: Buy call options the amount of calls is same as the number of shares we purchase in strategy A, and invest the remaining money in T-bills at interest rate whose annual interest rate is 10%. Suppose that the possible stock price are $90, $100, $110, and $120. (a) At expiration (after 6 months), compute the rates of return for each strategy given different possible stock prices. We don't consider the premium we’ve paid for holding call options in this case. (b) Given different stock price at expiration, which strategy would you like to choose? For example, if the stock price is $90, which…Consider a call option on one share of BP with a strike price of $70 and exercise time 1 quarter (3 months). Suppose the current stock price for BP is S(0) = $65 per share. Suppose further that A(0) = $100, A(1) = $102 and two possible prices for S(1) are S $74 with probability 0.5, S(1) = $66 with probability 0.5. Evaluate the expected returns E(Ks) and E(Kc) for the stock and the option.You think that the stock of Fleetwood Corp is likely to rise within the next six months from its current price ($19.00 bid and $20.00 ask), and you want to maximize the amount of profit from your investment. So, you will use a margin account to borrow on margin in order to buy as many shares as you can. Your initial margin requirement is 45%, and you have $90,000 of your own money to invest in the shares. The minimum (maintenance) margin is 30%, and Fleetwood does not pay dividends. (Ignore interest for this problem.) If you buy Fleetwood on margin with the maximum margin loan, what is the maximum number of shares you can buy? Suppose you bought the maximum number of shares of Fleetwood as in (1). Assume that immediately after your purchase, Fleetwood’s share price drops to $18.00 per share. Calculate your new margin. Will you receive a margin call? How far can the price drop before you will receive a margin call? If the stock price falls to $14.00, you calculate that you would…
- You are bearish on Telecom and decide to sell short 100 shares at the current market price of $36 per share. Required: a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? Initial margin b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position? (Round your answer to 2 decimal places.) Stock price reachesYou expect the price of a stock to increase by 20% in the following year, with a standard deviation of 30%. The stock currently trades at $50. You pursue a strategy of buying 100 shares of the stock on margin. The initial margin requirement is 50%. The annual interest on margin debt is 5% per year. (a) What is the expected return and standard deviation of your strategy? (assume there is no margin call.) (b) The maintenance margin is 30%. Six months after you establish your trade, you receive a margin call. What is the price of the stock when this happens?The common stock of the CGI Inc. has been trading in a narrow range around $35 per share for months, and you believe it is going to stay in that range for the next three months. The price of a three-month put option with an exercise price of $35 is $2, and a call with the same expiration date and exercise price sells for $3. Suppose you write a strap ( = write 2 calls and write 1 put with the same strike price) and the stock price winds up to be $37 at contract expiration. What was your net profit on the strap? A. $200 B. $300 C. $400 D. $500 E. $700