* You write a European vanilla call option today with a strike price of 100 pence and sell the option for 10 pence. The holder chooses to exercise the option on the expiry date. On this date, the underlying is worth 120 pence. Calculate, showing all steps, your overall profit/loss on this transaction.
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- A speculator purchases a put option on British Pounds for 0.05$ per unit; the strike price is 1.50$. A pound option represents 31.250 units Assume that at the time of the purchase, the spot rate of the pound is 151$ and continually rises to 1.62$ by the expiration date. 1. Compute the highest net profit possible for the speculator based on the information above? 2. Compute the highest profit/loss for the seller of this put optionYou are considering a European put option and a European call option on ABC Ltd and have available the following information. The put option with an exercise price of $15 and time to maturity of 60 days is priced at $2.00. The call option with the same exercise price and time to maturity is priced at $3.00. The underlying asset price is $15. The risk-free rate is 2% per 60 days. Could an arbitrage profit be earned? If so, how much the arbitrage profit is? Show your works (Hint: use discrete put-call parity equation and consider two scenarios for stock price at maturity of the options: $10 or $20).The speculator buys one put option at a strike price of $70/barrel and expiry date October 2021 for a premium of $1.20/barrel. Consider the following expected payoff chart for buying a put option. What are the names of point A and B? What is the exact value of A? What is the exact value B?
- eBook Reska, Inc., has constructed a long euro straddle. A call option on euros with an exercise price of $1.40 has a premium of $0.015 per unit. A euro put option has a premium of $0.009 per unit. Some possible euro values at option expiration are shown in the table below. a. Complete the worksheet and determine the net profit per unit to Reska, Inc., for each possible future spot rate. Use a minus sign to enter loss values, if any, If the answer is zero, enter "0". Round your answers to three decimal places. Call Put Net $0.90 $ $ $ $ b. Determine the break-even points of the long straddle. What are the break-even points of a short straddle using these options? Round your answers to three decimal places. Lower break-even point (long straddle): $ Higher break-even point (long straddle): s Lower break-even point (short straddle): s Higher break-even point (short straddle): 5 Value of Euro at Option Expiration $1.05 $1.50 $ S S $ $2.00 $Suppose you wrote a European put option on RDNW with an exercise of $30 and premium of $2.0. What would be your profit (per share) if the stock price at the expiration date is $26? Your Answer: Answer1. An investeor buys a ratio spread of 1-year European calls. He buys 1 call option with strike price 40 and sell 2 call options with strike price 50. Option prices are (Strike price, Call option premium) = (40, 10), (50, 5) (a) Draw its profit plot. Formulas and explains regarding your plot are required. (b) 45, 55, 65. Determine the investor's profit if the end price of the underlying stock is
- A European call that will expire in one year is currently trading for $3. Assume the risk-free rate (based on continuous compounding) is 5%, the underlying stock price is $60 and the strike price is $55. a. Is there an arbitrage opportunity? b. Describe exactly what a trader should do to take advantage of the arbitrage opportunity assuming it exists. c. Determine the present value of the profit that the trader can earn assuming you identify an arbitrage opportunity. Use at least four decimal places for those questions that require a numerical answer.An investor buys a European call option at a price of 7.6 yuan. The stock price is 52 yuan and the strike price is 55 yuan. Under what circumstances will the investor make a profit ? Under what circumstances will the option be executed ? Draw a diagram of the relationship between investor profitability and stock price at maturity.Suppose you work as a broker in an investment company, and there is an expectation that the market interest rate will be 0.029. based on this expectation you are required to calculate the market price for the following CD;Issue date: 1 January 2021 Maturity date:10 May 2021. The face value OMR 10000. Interest on CD: 5 percent. Select one: a. 15942.02 b. 15574.10 c. 15677.97 d. All the given choices are not correct e. 15572.50
- Suppose a European call option on a sack of corn with a strike price of $50 and a maturity of one-month, trades for $5. What is the price of the put premium with identical strike price and time until expiration, if the one-month risk-free rate is 2% and the spot price of the underlying asset is $53?Melbourne Capital Ltd considers selling European call options on ANZ Bank Ltd for $1.50 per option. The current market price is $17.70 on 28th September 2020, the exercise price is $20, and the maturity of each call option is 6 months. (i) Under what circumstances does the investor make a profit? (ii) Under what circumstances will the option be exercised? (iii) How many call options should the investor sell to raise a total capital of $1,260,000?Suppose you wrote a European put option on RDNW with an exercise of $30 and premium of $2.7. What would be your profit (per share) if the stock price at the expiration date is $26?