Which of the following are important factors in pricing exchange cleared options? A. strike price, underlying...

Which of the following are important factors in pricing exchange cleared options?

A. strike price, underlying price, time to expiry, volatility
B. strike price, volatility, time to expiry, seller credit rating
C. strike price, underlying price, volatility, seller credit rating
D. strike price, underlying price, time to expiry, seller credit rating

Expert Solution

Answer is A. Strike price, Underlying price, time to expiry, volatility.

Explanation: All these factors criticaly effect the pricing decisions of options having exchange clearance.

jeff jeffy answered 2 years ago

You long a call option with a strike price of K. The underlying asset price on...

You long a call option with a strike price of K. The underlying asset price on expiration date is S. What is your payoff? Group of answer choices S - K if S > K, but zero otherwise. K - S if K > S, but zero otherwise. 0 S - K You short a call option with a strike price of K. The underlying asset price on expiration date is S. What is your payoff? Group of answer choices...

Consider a call option with strike price of 2.5. Underlying stock is expected to follow the...

Consider a call option with strike price of 2.5. Underlying stock is expected to follow the distribution: Price Prob 1 0.05 2 0.20 3 0.25 4 0.25 5 0.20 6 0.05 1. When stock price is above the strike price of 2.5, what is the average value of the stock? (hint: first find conditional probabilities and then find weighted average) 2. What is the average payment from the call option when the call option is in the money (ie stock...

Consider a call option with a strike price of $60 where the underlying stock is currently...

Consider a call option with a strike price of $60 where the underlying stock is currently trading at $67 the continuously compounded risk free rate is 5%, and the standard deviation of the stock returns is 40% per year. The option has 9 months to expiration. Using the Black-Scholes model, what is the value of the call option?

You bought a call option with a strike price of $60. The underlying asset is trading...

You bought a call option with a strike price of $60. The underlying asset is trading for $53 and you paid a premium of $14. What is the most you could lose form this strategy?

Given the following 3 put options that have the same expiration date: A: Strike Price =...

Given the following 3 put options that have the same expiration date: A: Strike Price = $110, Market Price = $6 B: Strike Price = $120, Market Price = $10 C: Strike Price = $130, Market Price = $16 Explain how a butterfly spread can be created. Create a table in excel showing the profit from this. What range of stock prices would lead to a loss from this?

What factors should be considered in price setting, of these factors which is most important and...

What factors should be considered in price setting, of these factors which is most important and why?

You short a put with strike K. The underlying price at expiration is S. What's your...

You short a put with strike K. The underlying price at expiration is S. What's your payoff? Group of answer choices S - K if K > S, and zero otherwise. 0 K - S S - K What's the payoff at maturity to a long call with strike K and underlying asset price S? Group of answer choices max(S-K,0) min(S-K,0) max(K-S,0) min(K-S,0) What's the payoff at maturity to a long put with strike K and underlying asset price S?...

A put has strike price of $75. The put price is $10. Which of the following...

A put has strike price of $75. The put price is $10. Which of the following statements is the least accurate? a)The highest profit the put writer can make is $10 b)The highest profit the put holder can make is $65 c)The lowest profit the put writer can make is –$75 d)The highest payoff the put writer can make is $0 e)The highest payoff the put holder can make is $75

The following options are available: 3-month European call with a strike price of $20 that is priced at $1.00

The following options are available:3-month European call with a strike price of $20 that is priced at $1.003-month European put with a strike price of $20 that is priced at $4.003-month call with a strike price of $25 that is priced at $8.503-month put with a strike price of $25 that is priced at $7.00Currently, the price of the underlying stock is $25.501)Identify all arbitrage trades, not considering interest.2)For each set of trades you will make, please describe the trades...

Consider the following European plain vanilla options: (1) a call with strike price K = 160,...

Consider the following European plain vanilla options: (1) a call with strike price K = 160, (2) a put with strike price K = 160, (3) a call with strike price Kc = 165, and (4) a put with strike price Kp = 155. All options have the same non-dividend-paying underlying stock and mature after one year. Assuming current stock price 160, stock price volatility 22%, and continuously compounded risk-free interest rate 0.49%. Assume a long position in options (1)...

Question