You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months. The current price of the stock is $67 per share. You want to establish a bullish money spread to help limit the cost of your option position. You find the following option quotes: Wildwood Corporation Underlying Stock price: $67.00 Call Exp. Strike Put June $62.00 $ 10.20 $3.70 June $72.00 $2.85 $9.20 Ignoring commissions, the cost to establish the bull money spread with calls would be (If the spread is a cash outflow, please use a negative sign.) 735

You are cautiously bullish on the common stock of the Wildwood Corporation over the next several months. The current price of the stock is $67 per share. You want to establish a bullish money spread to help limit the cost of your option position. You find the following option quotes: Wildwood Corporation Underlying Stock price: $67.00 Call Exp. Strike Put June $62.00 $ 10.20 $3.70 June $72.00 $2.85 $9.20 Ignoring commissions, the cost to establish the bull money spread with calls would be (If the spread is a cash outflow, please use a negative sign.) 735

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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Given the following information, price of a stock: strike price of a six-month call: market price of the call: strike price of a six-month put: market price of the put: The maximum the seller of the put can lose is $ $102 $100 $6 $100 $3
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pm.4 answer must be in proper format or i will give dowvote
Q6: Dayo is long a bear spread with strike prices 9.00 and 19.00. The options expire in 12 months, the spot price is $12.50, the stock volatility is 55.00%, the risk free interest rate is 5.75% and the stock dividend rate is 0.00. Dayo delta hedges the position initially and then doesn't adjust the delta hedge. One month later the stock price is still the same. How much does delta change? A) 0.02407 B) 0.02721 C) 0.02093 D) 0.01988 E) Ii depends on whether she used put options or call options for the initial position.
k nces The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $83 per share. You have employee stock options to purchase 1,000 TWTR shares for $88 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 73 percent and that the interest rate is 3.4 percent. (Assume the options are European options that may only be exercised at the maturity date.) a. Is this option a call or a put? Call O Put b. Using an option pricing calculator such as the one at erieri.com/blackscholes, estimate the value of your TWTR options. Note: Round your intermediate calculations to 2 decimal places and final answer to nearest whole dollar. Value of your TWTR options $ 83,000 c. What is the estimated value of the options if their maturity is six months instead of three years? Note: Round your intermediate calculations to 2 decimal places and final answer to nearest whole dollar. Value of the options d. What is the estimated value of the…
On January 1 2021 you buy shares of an s&p index ETF at $370 each. You are concerned about the possible drop in value of the large cap equities before year end. The S&P 500 currently is at $4,669. You decide to buy an at-the – money put option on the s&p 500 index to insulate your portfolio from a decline in equity prices. Each put ( assume one put per ETF share)is prived at $56 and expires on 31 december. If the s&p is at $4680 on 31 december an dyour ETF position is priced at $468, what is the annualized percent return on entire investment in the ETF, including the put
Question 1 A bank has just sold a call option on 500,000 shares of a stock. The strike price is 40; the stock price is 40; the risk-free rate is 5%; the volatility is 30%; and the time to maturity is 3 months. a) What position should the company take in the stock for delta neutrality? b) Suppose that the bank does set up a delta neutral position as soon as the option has been sold and the stock price jumps to 42 within the first hour of trading. What trade is necessary to maintain delta neutrality? Explain whether the bank has gained or lost money in this situation. (You do not need to calculate the exact amount gained or lost.) c) Repeat part b) on the assumption that the stock jumps to 38 instead of 42. note: calculation should be provided with mathematical formulars

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