Question
In: Finance
If a trader feels that neither a stock price nor its implied volatility will change, what...
If a trader feels that neither a stock price nor its implied volatility will change, what is the most appropriate option position she/he adopt?
Solutions
Expert Solution
Option provides trader the right but not the obligation to purchase or sell underlying assets. If a trader feels that stock price and its implied volatility would not change then he should sell (write) the option in order to create highest positive theta position. Theta is related in measuring the rate by which option would lose its time value as the expiration period of option nears.
jeff jeffy answered 2 years agoRelated Solutions
Calculate the Implied Volatility of the following options on Stock XYX. Stock Price=$50; Risk Free Rate...
Calculate the Implied Volatility of the following options on
Stock XYX.
Stock Price=$50; Risk Free Rate =10%; Dividends =$0;
Expiration Date=1 Year; Strike Price =$50; Option Price= $7
why you did not find a single implied volatility for each stock and why your implied...
why you did not find a single implied volatility for each stock
and why your implied volatilities were arrayed as they are?
MSFT
Strike
Option Price
Implied-Volatility
B-S Implied Volatility
175.
4.95
0.3279
0.132178
177.5
3.32
0.3157
0.124592
180.
2.04
0.3103
0.118525
182.5
1.13
0.3027
0.113638
185.
0.58
0.302
0.111275
Strike
Option Price
Implied-Volatility
B-S Implied Volatility
175.
1.32
0.3477
0.105137
177.5
2.2
0.3413
0.100382
180.
3.41
0.332
0.0930169
182.5
5.05
0.3452
0.0846884
185.
7.
0.3477
0.0560192
The Watch Corporation of Switzerland claims that its watches on average will neither gain nor lose...
The Watch Corporation of Switzerland claims that its watches on
average will neither gain nor lose time during a week. A sample of
18 watches provided the following gains (+) or losses (-) in
seconds per week.
-0.14
-0.64
-0.86
-0.85
0.16
-0.34
0.23
0.35
-0.33
-0.17
-0.89
-0.73
-0.36
-0.13
-0.27
-0.72
-0.20
0.36
H0: μ = 0
H1: μ ≠ 0
Is it reasonable to conclude that the mean gain or loss in time
for the watches is...
The Watch Corporation of Switzerland claims that its watches on average will neither gain nor lose...
The Watch Corporation of Switzerland claims that its watches on
average will neither gain nor lose time during a week. A sample of
18 watches provided the following gains (+) or losses (-) in
seconds per week.
-0.41
-0.70
-0.30
-0.11
0.34
-0.62
0.46
0.73
-0.30
-0.55
-0.56
-0.72
-0.14
-0.21
-0.23
-0.76
-0.67
0.22
H0: μ = 0
H1: μ ≠ 0
Is it reasonable to conclude that the mean gain or loss in time
for the watches is...
The Watch Corporation of Switzerland claims that its watches on average will neither gain nor lose...
The Watch Corporation of Switzerland claims that its watches on
average will neither gain nor lose time during a week. A sample of
18 watches provided the following gains (+) or losses (-) in
seconds per week.
-0.27
-0.40
-0.16
-0.78
0.58
-0.45
0.58
0.40
-0.64
-0.82
-0.40
-0.73
-0.54
-0.17
-0.69
-0.28
-0.58
0.36
H0: μ = 0
H1: μ ≠ 0
Is it reasonable to conclude that the mean gain or loss in time
for the watches is...
Suppose that the price of a non-dividend-paying stock is $32, its volatility is 30%, and the...
Suppose that the price of a non-dividend-paying stock is $32,
its volatility is 30%, and the risk-free rate for all maturities is
5% per annum. Use DerivaGem to calculate the the cost of setting up
the following positions:
(a)
a bull spread using European call options with strike prices of $25
and $30 and a maturity of 6 months
(b)
a bear spread using European put options with strike prcies of $25
and $30 and a maturity of 6 months...
Watch Corporation of Switzerland claims that its watches on average will neither gain nor lose time...
Watch Corporation of Switzerland claims that its watches on
average will neither gain nor lose time during a week. A sample of
18 watches provided the following gains (+) or losses (−) in
seconds per week.
−0.30
−0.27
−0.34
−0.25
+0.31
−0.20
+0.36
+0.24
−0.19
−0.40
−0.49
−0.55
−0.55
−0.67
−0.03
−0.23
−0.54
+0.08
State the null hypothesis and the alternate hypothesis.
State the decision rule for 0.02 significance level.
(Negative amounts should be indicated by a minus sign.
Round...
Watch Corporation of Switzerland claims that its watches on average will neither gain nor lose time...
Watch Corporation of Switzerland claims that its watches on
average will neither gain nor lose time during a week. A sample of
18 watches provided the following gains (+) or losses (−) in
seconds per week.
Click here for the Excel Data File
−0.43
−0.22
−0.42
−0.37
+0.27
−0.23
+0.32
+0.54
−0.19
−0.29
−0.34
−0.55
−0.44
−0.56
−0.05
−0.19
−0.24
+0.08
State the null hypothesis and the alternate hypothesis.
State the decision rule for 0.01 significance level.
(Negative amounts should...
Watch Corporation of Switzerland claims that its watches on average will neither gain nor lose time...
Watch Corporation of Switzerland claims that its watches on
average will neither gain nor lose time during a week. A sample of
18 watches provided the following gains (+) or losses (−) in
seconds per week. Picture Click here for the Excel Data File −0.16
−0.15 −0.20 −0.17 +0.26 −0.19 +0.30 +0.43 −0.10 −0.31 −0.48 −0.44
−0.51 −0.67 −0.05 −0.24 −0.51 +0.05
A. State the null hypothesis and the alternate hypothesis.
H0= (mean symbol) =
H1= (mean symbol) =
B....
Watch Corporation of Switzerland claims that its watches on average will neither gain nor lose time...
Watch Corporation of Switzerland claims that its watches on
average will neither gain nor lose time during a week. A sample of
18 watches provided the following gains (+) or losses (–) in
seconds per week. Picture Click here for the Excel Data File –0.42
–0.17 –0.11 –0.28 +0.33 –0.25 +0.34 +0.25 –0.08 –0.32 –0.54 –0.44
–0.45 –0.64 –0.04 –0.26 –0.44 +0.09 a-1. Is it reasonable to
conclude that the mean gain or loss in time for the watches is...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- C++ Question1. Create a class called Rantional for performing arithmatic with fractions. Then write a program...
- Balanced scorecards are widely used by companies to “balance” their financial with nonfinancial objectives. Do a...
- Assume a 2.8 MByte file is being uploaded from a client application to a web server....
- Question #14. a. TRUE OR FALSE: Code written using a case/switch construct can always be rewritten...
- Problem 18-14 Beta and Leverage Fitzgerald Industries has a new project available that requires an initial...
- What are the accounts that make up Shareholder’s Equity on the Balance Sheet?
- Problem 18-5 Beta and Leverage North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation...
ADVERTISEMENT