Question
In: Finance
The price of a stock is $36. You can buy a six-month call option with $33...
The price of a stock is $36. You can buy a six-month call option with $33 exercise price for $3.2 or a six-month put option with $33 exercise price for $1.2.
(a) What is the intrinsic value of the call option?
(b) What is the intrinsic value of the put option?
(c) What is the time premium paid for the call option?
(d) What is the time premium paid for the put option?
(e) If the price of the stock rises, what happens to the value of the put?
(f) What is the maximum you could lose by selling the call covered?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Suppose that you buy a six-month call option on stock Y with an exercise price of...
Suppose that you buy a six-month call option on stock Y with an
exercise price of $80 and sell a six-month call option on Y with an
exercise price of $120. Draw a position diagram showing the payoffs
when the options expire. (Hint: Determine and then add up the
values of the two options given different share prices.)
You buy a share of BP stock for 150, and a six-month call option at 160...
You buy a share of BP stock for 150, and a six-month call
option at 160 for 9.83. You sell a six month put option at 150 for
11.12. You hold your portfolio until the expiration
date. On the expiration date you cash out your portfolio. Graph the
profits of your strategy as the price of BP stock at the expiration
date goes from 125 to 200. Profits equal the amount you receive at
the expiration date for cashing out...
3. A six-month call option is the right to buy stock at $30. Currently, the stock...
3. A six-month call option is the right to buy
stock at $30. Currently, the stock is selling for $32 and the call
is selling for $3. You are considering buying 100 shares of the
stock ($3,000) or one call option ($300).
a) If the price of the stock rises to $39 within six months,
what would be the profits or losses on each position? What would be
the percentage gains or losses?
b) If the price of the stock...
What is the price of a six-month European call option on a stock expected to pay...
What is the price of a six-month European call option on a stock
expected to pay a dividend of $1.50 in two months when the stock
price is $50, the strike price is $50, the risk-free interest rate
is 5% per annum and the volatility is 30% p.a.? Show all
working.
What is the price of a six-month European call option on a stock expected to pay...
What is the price of a six-month European call option on a stock
expected to pay a dividend of $1.50 in two months when the stock
price is $50, the strike price is $50, the risk-free interest rate
is 5% per annum and the volatility is 30% p.a.? Show all
working.
A particular call is the option to buy stock at $35. It expires in six months...
A particular call is the option to buy stock at $35. It expires
in six months and currently sells for $6 when the price of the
stock is $36.
a) What is the intrinsic value of the call? What is the time
premium paid for the call?
b) What will the value of this call be after six months if the
price of the stock is $29, $35, $39, and $50, respectively?
c) If the price of the stock rises...
Bull call spread strategy: The current stock price of is $78.91, you buy a call option...
Bull call spread strategy: The current stock price of is $78.91,
you buy a call option with the expiration of August 21, with the
strike price of 72.50$ with ask $11.30, then sell a call for 82.50$
with bid $5.40. You buy a 44 contracts of each call option, with a
multiplier of 100. Net Debit: paying $49,720(1,130*44 contracts)
and receiving $23,760(540*44)= $25,960
You liquidate the options before expiration on May 20. The stock
price on May 20 is 98$....
A call option on a particular stock with a six-month maturity is currently priced at $9.96....
A call option on a particular stock with a six-month maturity is
currently priced at $9.96. The stock price is $62 and the call’s
exercise price is $60. The risk-free-rate is 6%/year and is
compounded continuously. Using the information above, answer the
following questions.
a)What is the value of a put option written on the same stock
having the same maturity and exercise price?
b)What is the intrinsic value of the call and the put options?
c)What is the time...
The current price of a stock is $84. A one-month call option with a strike price...
The current price of a stock is $84. A one-month call option
with a strike price of $87 currently sells for $2.80. An investor
who feels that the price of the stock will increase is trying to
decide between two strategies that require the same upfront cost:
Buying 100 shares or buying 3,000 call options (30 call option
contracts). How high does the stock price have to rise for the
option strategy to be more profitable?
Find the Black-Scholes price of a six-month call option written on €100,000 with a strike price...
Find the Black-Scholes price of a six-month call option written
on €100,000 with a strike price of $1.0000/€. The current exchange
rate is $1.125/€. The U.S. risk-free rate is 2 percent over the
period and the euro-zone risk-free rate is 1 percent. The
volatility of the underlying asset is 10.5 percent.
$0.1309/€
$0.1682/€
$0.1452/€
$0.0016/€
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