You buy a put with a strike price of $40. Current price is $37.82, has a...

You buy a put with a strike price of $40. Current price is $37.82, has a u of 1.21 and a d of .82. The risk free rate is 1% per period. Use a time period binomial model. if price goes down, what is your holding period return?

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

The price of a stock is $40. The price of a one-year put with strike price...

The price of a stock is $40. The price of a one-year put with strike price $30 is $0.70 and a call with the same time to maturity and a strike of $50 costs $0.50. Both options are European. (a) An investor buys one share, shorts one call and buys one put. Draw and comment upon the payoff of this portfolio at maturity as a function of the underlying price. (b) How would your answer to (a) change if the...

You want to buy an American Put on Apple (AAPL) with a strike price of $280....

You want to buy an American Put on Apple (AAPL) with a strike price of $280. Apple is currently trading for $282.12, has a u of 1.14, and a d of 0.88. The risk free rate is 1% per period. Use a two period binomial model. What is the most you should pay for that put?

You want to buy an American Put on Apple (AAPL) with a strike price of $290....

You want to buy an American Put on Apple (AAPL) with a strike price of $290. Apple is currently trading for $282.12, has a u of 1.15, and a d of 0.87. The risk free rate is 1% per period. Use a two period binomial model. What is the most you should pay for that put? Note: Answer in dollars per share, round to the nearest penny.

Problem 3 – Naked Put A put with the strike price of $40 was sold short...

Problem 3 – Naked Put A put with the strike price of $40 was sold short at $4.20 when the price of the underlying stock was $38.00 per share. Draw the gain/loss chart for the naked put.

You buy one call and one put with a strike price of $60 for both. The call...

You buy one call and one put with a strike price of $60 for both. The call premium is $5 and the put premium is $6. What is the maximum loss from this strategy? [Using positive number for profit, and negative number for loss]

Which of the following will create a bear spread? Buy a put with a strike price...

Which of the following will create a bear spread? Buy a put with a strike price of X = 45 and sell a put with a strike price of X = 50 Buy a call with a strike price of X = 45 and sell a call with a strike price of X =50 Buy a call with a strike price of X = 50 and sell a call with a strike price of X = 45 Buy a call...

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

Suppose that you buy 4 put options with strike price $50 at $5 each, and sell...

Suppose that you buy 4 put options with strike price $50 at $5 each, and sell 5 call options with strike price $31 at $2.5 each. a) What is your profit if the stock price at maturity is $41? b)What is your profit if the stock price at maturity is $52? c) What is your profit if the stock price at maturity is $30?

The price of a European put that expires in six months and has a strike price...

The price of a European put that expires in six months and has a strike price of $100 is $3.59. The underlying stock price is $102, and a dividend of $1.50 is expected in four months. The term structure is flat, with all risk-free interest rates being 8% (cont. comp.). What is the price of a European call option on the same stock that expires in six months and has a strike price of $100? [1 marks] Explain in detail...

1. Bluefish has a put option that trades with a strike price of $74. The put...

1. Bluefish has a put option that trades with a strike price of $74. The put option premium is $12. Determine the profit/loss on WRITING one Bluefish put option if at the option's expiration the stock price is $50. 2. Kingfish has call options trading with a strike price of $77 and a premium of $10. Determine the profit/loss to the buyer of the call option if at the time of expiration the stock price is $63.

Subjects