The premium on a pound put option is $.03 per unit. The exercise price is $1.60....

The premium on a pound put option is $.03 per unit. The exercise price is $1.60. The break-even point is _______ for the buyer of the call, and _______ for the seller of the call. (Assume zero transactions costs and that the buyer and seller of the put option are speculators.) $1.57; $1.57 $1.63; $1.63 $1.63; $1.57 $1.57; $1.63

Expert Solution

Calculation of break even point of buyer of call:

Break even point= exercise price+ premium

Break even point of buyer= 1.60+0.03= $1.63

Calculation of break event point of seller:

Break even point= exercise price- premium= 1.60-0.03= 1.57

Break even point of seller= $1.57

jeff jeffy answered 2 years ago

Assume that a British pound put option has a premium of $.03 per unit and an...

Assume that a British pound put option has a premium of $.03 per unit and an exercise price of $1.60. The present spot rate is $1.61. The expected future spot rate on the expiration date is $1.52. The option will be exercised on this date, if at all. What is the expected per unit net gain (or loss) resulting from purchasing the put option?

A speculator purchases a put option for a premium of $2.75, with an exercise price of...

A speculator purchases a put option for a premium of $2.75, with an exercise price of $70. The stock is presently priced at $69, and rises to $82 before the expiration date. What is the stock price at which the speculator would break even?

Consider a European put option on British pounds with an exercise price of $1.60/£. You pay...

Consider a European put option on British pounds with an exercise price of $1.60/£. You pay an option premium of $0.04/£ to buy the put option today. You decide whether to exercise the put option on the expiration date. (6 points) In the following table, fill in the option payoff per pound as well as net profit (or loss) per pound based on the listed possible spot rates of dollars per pound at expiration (Net profit or loss = Payoff...

What is the price of a put premium vs. a call option premium if they have...

What is the price of a put premium vs. a call option premium if they have the same strike price and same expiration on the same stock? Is one typically more expensive than the other?

If the share price is $21.50 and the exercise price and premium of a call option...

If the share price is $21.50 and the exercise price and premium of a call option written on that share are $19.90 and $2.00, respectively, what is the time value of the option? Select one: $2.00 $0.40 $0.00 $17.90 $1.60

The premium on a June 17 British pound call option with a strike price of $1.2560...

The premium on a June 17 British pound call option with a strike price of $1.2560 when the spot rate is $1.2620 is quoted as $0.02. The time value of this option is. The premium on a June 17 British pound call option with a strike price of $1.2750 when the spot rate is $1.2620 is quoted as $0.025. The intrinsic value of this option is. Your firm has an accounts receivable worth C$200,000 due in six months. The firm...

Consider a call option with a premium of $8 for which the exercise price is $50....

Consider a call option with a premium of $8 for which the exercise price is $50. What is the profit for a holder if the underlying stock price at expiration is $60.00? What is the profit for the seller?

Assume that a speculator purchases a put option on British pounds (with a strike price of $1.50) for $.05 per unit.

Assume that a speculator purchases a put option on British pounds (with a strike price of $1.50) for $.05 per unit. A pound option represents 31,250 units. Assume that at the time of the purchase, the spot rate of the pound is $1.51 and continually rises to $1.62 by the expiration date. The highest net profit possible for the speculator based on the information above is:

1a) Suppose a put option with a strike price of $65 has a premium of $11,...

1a) Suppose a put option with a strike price of $65 has a premium of $11, while another put on the same underlying stock has a strike price of $70 and a premium of $9. Both options expire at the same time. In this situation, an arbitrageur would... Answers: a. do nothing because arbitrage is not possible. b. buy both put options. c. buy the 70-strike put and sell the 65-strike put. d. buy the 65-strike put and sell the...

Bulldog, Inc., has sold Australian dollar call options at a premium of $.03 per unit, and...

Bulldog, Inc., has sold Australian dollar call options at a premium of $.03 per unit, and an exercise price of $.89 per unit. It has foretasted the Australian dollar's rate over the period of concern as $.86, $.87, $.88, $.89, $.91 and $.92. Determine the net profit (or loss) per unit to Bulldog, Inc., if Australia dollar each level occurs (show detailed analysis; follow the five steps in the teaching notes).

Question