Question
In: Finance
Suppose you are given the following prices for the options on ABC stock: Strike (in $)...
Suppose you are given the following prices for the options on ABC stock:
Strike (in $) call put
15.0 1.6 2.0
17.5 1.2 2.5
20.0 0.9 3.2
Suppose you take the following position: long one call with strike 15.0, short two calls with strike 17.5, and long one call with strike 20.0. Please draw the payoff at maturity.
What would be the total gain (loss) on the above position if the stock price at maturity turned out to be S(T) = 16 (taking into account the price of the options)?
Suppose you decide to buy a 15.0 straddle (1 long call + 1 long put with the same strike of 15.0). Please draw the payoff at maturity.
Over what range of underlying stock price (at maturity) will you lose money (after taking into account the price you paid for the options)?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Suppose you are given the following prices for the options on ABC stock: Strike (in $) ...
Suppose you are given the following prices for the options on
ABC stock:
Strike (in
$)
call
put
15.0
1.6
2.0
17.5
1.2
2.5
20.0
0.9
3.2
please write the solving process
without using excel
Suppose you take the following position: long one call with
strike 15.0, short two calls with strike 17.5, and long one call
with strike 20.0. Please draw the payoff at maturity.
What would be the total gain (loss) on the above position if
the stock...
Suppose you are given the following prices for the options on ABC stock: CANNOT BE ON...
Suppose you are given the following prices for the options on
ABC stock:
CANNOT BE ON
EXCEL
Strike (in
$)
call
put
15.0
1.6
2.0
17.5
1.2
2.5
20.0
0.9
3.2
Suppose you take the following position: long one call with
strike 15.0, short two calls with strike 17.5, and long one call
with strike 20.0. Please draw the payoff at maturity.
What would be the total gain (loss) on the above position if
the stock price at maturity turned...
Suppose that put options on a stock with strike prices $30 and $35 cost $4 and...
Suppose that put options on a stock with strike prices $30 and
$35 cost $4 and $7, respectively. How can the options be used to
create (a) a bull spread and (b) a bear spread? For both spreads,
show the profit functions for the intervals defined by the strike
prices, and their graphical representation.
Suppose that put options on a stock with strike prices $30 and $35 cost $4 and...
Suppose that put options on a stock with strike prices $30 and
$35 cost $4 and $7, respectively. They both have 6-month
maturity.
(a) How can those two options be used to create a bear
spread?
(b) What is the initial investment?
(c) Construct a table that shows the profits and payoffs for the
bear spread when the stock price in 6 months is $28, $33 and $38,
respectively. The table should look like this:
Stock Price
Payoff
Profit
$28...
Suppose that put options on a stock with strike prices $30 and $34 cost $4 and...
Suppose that put options on a stock with strike prices $30 and
$34 cost $4 and $6, respectively. How can the options be used to
create (a) a bull spread and (b) a bear spread? Construct a table
that shows the profit and payoff for both spreads.
Suppose that call options on a stock with strike prices $120, $140 and $160 cost $13,...
Suppose that call options on a stock with strike prices
$120, $140 and $160 cost $13, $14 and $18, respectively. How can
the options be used to create a Butterfly spread?
Call 1 – Strike $120: Position Long or
short?__________
Call 2 – Strike $140: Position Long or
short?__________
Call 3 – Strike $160: Position Long or
short?__________
I. Explain
how you can built the spread and write a table that shows the
profit and payoff for each option and...
8. Suppose that put options on a stock with strike prices $33 and $40 cost $2...
8. Suppose that put options on a stock with strike prices $33
and $40 cost $2 and $5, respectively.
a. How can the options be used to create (a) a bull spread and
(b) a bear spread? •
b. Is there a maximum profit or loss for each strategy? If so,
what are they?
c. What are the breakeven points?
d. At what range of future stock prices will the spread make
profit and loss.
3. Suppose that call options on a stock with strike prices $40 and $45 cost $5...
3. Suppose that call options on a stock with strike prices $40
and $45 cost $5 and $4, respectively. They both have 10-month
maturity. (a) How can those two call options be used to create a
bull spread?
(b) What is the initial investment?
(c) Construct a table showing how payoff and profit varies with
ST in 10 month, for the bull spread you created. The table should
looks like this:
Stock Price
Payoff
Profit
ST < K1
K1 <...
Suppose that p1, p2, and p3 are the prices of European put options with strike prices...
Suppose that p1, p2, and p3 are the prices of European put
options with strike prices K1, K2, and K3, respectively, where
K3>K2>K1 and K3-K2=K2-K1. All options have the same maturity.
Show that p2 <= 0.5(p1+p3) (Hint: Consider a portfolio that is
long one option with strike price K1, long one option with strike
price K3, and short two options with strike price K2.)
Call options on a stock are available with strike prices of $15, $17.5, and $20 and...
Call options on a stock are available with strike
prices of $15, $17.5, and $20 and
expiration dates in 3-months. Their
prices are $4, $2, and $0.5, respectively. An investor creates
a portfolio by buying call options with strike
prices of $15 and $20 and selling 2 call options
with strike prices of $17.5.
a. Construct a table showing how profit varies with the stock
price for this portfolio.
b. Plot the payoff diagram?
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