Question
In: Finance
Nine-month put options with strike prices of $55 and $60 cost $4 and $7, respectively. What...
Nine-month put options with strike prices of $55 and $60 cost $4 and $7, respectively. What is the maximum gain when a bear spread is created by trading a total of 200 options?
Select one:
a. $100
b. $200
c. $300
d. $400
Solutions
Expert Solution
Cost from put option = (7-4)*200 = 600
Cost from Stock = (60-55)*200 = 1000
Maximum gain = 1000 - 600 = 400
jeff jeffy answered 2 years agoRelated Solutions
Six-month call options with strike prices of $35 and $40 cost $6 and $4, respectively. You...
Six-month call options with strike prices of $35 and $40 cost
$6 and $4, respectively. You plan to create a bull spread call
(Buying a call spread) by trading a total of 200 options?
Total amount of credit or debit:
____________________ (Credit or Debit?)
Maximum amount of profit or loss:
_______$300*200_____________ (Profit or Loss?)
Break-even stock price of this spread:
____________________
NB: show complete workings
Six-month call options with strike prices of $20 and $26 cost $4 and $2, respectively. You...
Six-month call options with strike prices of $20 and $26 cost
$4 and $2, respectively. You plan to create a bull spread call
(Buying a call spread) by trading a total of 100 options. Answer
the following questions.?
Total amount of credit or debit:
Maximum amount of
loss:
Maximum amount of
profit:
Break-even stock price of this
spread:
Six-month put options with strike prices of $40 and $45 cost $3
and $5, respectively. You plan to create a bull spread...
Suppose that put options on a stock with strike prices $30 and $35 cost $4 and...
Suppose that put options on a stock with strike prices $30 and
$35 cost $4 and $7, respectively. How can the options be used to
create (a) a bull spread and (b) a bear spread? For both spreads,
show the profit functions for the intervals defined by the strike
prices, and their graphical representation.
Suppose that put options on a stock with strike prices $30 and $35 cost $4 and...
Suppose that put options on a stock with strike prices $30 and
$35 cost $4 and $7, respectively. They both have 6-month
maturity.
(a) How can those two options be used to create a bear
spread?
(b) What is the initial investment?
(c) Construct a table that shows the profits and payoffs for the
bear spread when the stock price in 6 months is $28, $33 and $38,
respectively. The table should look like this:
Stock Price
Payoff
Profit
$28...
Suppose that put options on a stock with strike prices $30 and $34 cost $4 and...
Suppose that put options on a stock with strike prices $30 and
$34 cost $4 and $6, respectively. How can the options be used to
create (a) a bull spread and (b) a bear spread? Construct a table
that shows the profit and payoff for both spreads.
1-month call and put price for European options at strike 108 are 0.29 and 1.70, respectively....
1-month call and put price for European options at strike 108
are 0.29 and 1.70, respectively. The prevailing short-term interest
rate is 2% per year.
Find the current price of the stock using the put-call
parity.
Suppose another set of call and put options on the same stock
at the strike price of 106.5 is selling for 0.71 and 0.23,
respectively. Is there any arbitrage opportunity at 106.5 strike
price? Answer this by finding the amount of arbitrage profit
available...
Consider six-month put options with strike prices of $35 and $40 per share and premiums of...
Consider six-month put options with strike
prices of $35 and $40 per share and premiums of $4 and $6 per
share, respectively. What is the maximum gain per
share when a bear spread is created from the calls? What is the
maximum loss per share when a bear
spread is created from the calls?
8. Suppose that put options on a stock with strike prices $33 and $40 cost $2...
8. Suppose that put options on a stock with strike prices $33
and $40 cost $2 and $5, respectively.
a. How can the options be used to create (a) a bull spread and
(b) a bear spread? •
b. Is there a maximum profit or loss for each strategy? If so,
what are they?
c. What are the breakeven points?
d. At what range of future stock prices will the spread make
profit and loss.
Suppose that p1, p2, and p3 are the prices of European put options with strike prices...
Suppose that p1, p2, and p3 are the prices of European put
options with strike prices K1, K2, and K3, respectively, where
K3>K2>K1 and K3-K2=K2-K1. All options have the same maturity.
Show that p2 <= 0.5(p1+p3) (Hint: Consider a portfolio that is
long one option with strike price K1, long one option with strike
price K3, and short two options with strike price K2.)
Three put options on a stock have the same expiration date and strike prices of $70,...
Three put options on a stock have the same expiration date and
strike prices of $70, $80, and $90 are available at prices of $5,
$7, and $10, respectively. Explain how a butterfly spread can be
created. Construct a table showing the profit from the strategy.
For what range of stock prices would the butterfly spread lead to a
loss? Input your Payoff Table and Draw your payoff diagram :
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