Question
In: Finance
A trader creates a long strangle with put options with a strike price of $160 per...
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A trader creates a long strangle with put options with a strike price of $160 per share, and call options with a strike of $170 per share by trading a total of 30 option contracts (15 put contracts and 15 call contracts). Each contract is written on 100 shares of stock. The put option is worth $13 per share, and the call option is worth $11 per share.
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What is the value of the strangle at maturity as a function of the then stock price?
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What is the profit of the strangle at maturity as a function of the then stock price?
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Solutions
Expert Solution
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jeff jeffy answered 2 years agoRelated Solutions
A trader creates a long strangle with put options with a strike price of $160 per...
A trader creates a long strangle with put options with a strike
price of $160 per share, and call options with a strike of $170 per
share by trading a total of 30 option contracts (15 put contracts
and 15 call contracts). Each contract is written on 100 shares of
stock. The put option is worth $13 per share, and the call option
is worth $11 per share.
A. What is the value of the strangle at maturity as a...
A trader buys 200 put options on a stock with a strike price of $100 when...
A trader buys 200 put options on a stock with a strike price of
$100 when the option price is $3 and the stock price is $102. The
trader holds the options to the maturity date when the stock price
is $107. What is the trader’s net profit or loss?
A trader creates a long butterfly spread from options with strike prices X, Y, and Z,...
A trader creates a long butterfly spread from options with
strike prices X, Y, and Z, where X < Y < Z, and Y is exactly
midway between X and Z. A total of 400 options are traded. The
difference between X and Y is $12. The difference in the prices of
the options with strike prices of Z and Y is $5.88. The difference
in the prices of the options with strike prices of Y and X is
$6.32....
1. A trader creates a long butterfly spread from options with strike prices of $90, $100,...
1. A trader creates a long butterfly spread from options with
strike prices of $90, $100, and $110 per share by trading a total
of 20 option contracts (buy 5 contracts at $90, sell 10 contracts
at $100 and buy 5 contracts at $110). Each contract is written on
100 shares of stock. The options are worth $15, $18, and $22 per
share of stock, respectively.
a) What is the value of the butterfly spread at maturity as a
function...
9.A trader creates a bear spread by selling a six-month put option with a $50 strike...
9.A trader creates a bear spread by selling a six-month put
option with a $50 strike price for $4.50 and buying a six-month put
option with a $60 strike price for $9.50. What is the initial
investment? What is the profit on the trade at maturity when the
then stock price is (a) $46, (b) $56, and (c) $66?
A trader buys a put on a stock having a certain strike price and buys a...
A trader buys a put on a stock having a certain strike price and
buys a put on the same stock having a higher strike price. She also
writes (sells) two puts having a strike price in the middle of the
other two strike prices.
a. Illustrate the resulting payoff pattern (profits for different
possible stock prices at the expiration date) this position will
give the trader. Explain.
b. If you didn’t include the answer to this question...
Between long straddle and long strangle, which one should a trader choose when there is a...
Between long straddle and long strangle, which one should a
trader choose when there is a volatility
market?
A trader observes that a) A put on stock X which does not pay dividends with strike price
A trader observes that a) A put on stock X which does not pay dividends with strike price$20 and exercisable in one year trades at $3 and b) A call on the same stock with the same strikeprice and also exercisable in one year trades at $25. If the stock trades today at $30/share and therisk-free rate is 10%, design a profitable arbitrage strategy for the trader.
A long strangle is created by buying a slightly out of the money put and a...
A long strangle is created by buying a slightly out of the money
put and a slightly out of the money call with the same expiration
date.
The market price of MSFT is $184.00.
The June 5 $195.00 calls have a premium of $1.70
The June 5 $175.00 calls have a premium of $3.70
a) What is the most an investor can lose on this position?
b) What does the price of MSFT need to be for the investor to...
Suppose you short a put option with a strike price of $20 and long another put...
Suppose you short a put option with a strike price of $20 and
long another put option with a strike price of $18. Assume the
premium for the first option is $1 and the premium for the second
option is $0.5. Which of the following is correct?
You wish the stock price stays above $20.
If stock price is at $19.8, you have incurred a loss.
You only have a loss if the stock price goes below $18.
You only...
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