Question
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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.
Solutions
Expert Solution
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -
jeff jeffy answered 1 year agoRelated 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 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?
Suppose you short a put option with a strike price of $20 and long another put...
Suppose you short a put option with a strike price of $20 and
long another put option with a strike price of $18. Assume the
premium for the first option is $1 and the premium for the second
option is $0.5. Which of the following is correct?
You wish the stock price stays above $20.
If stock price is at $19.8, you have incurred a loss.
You only have a loss if the stock price goes below $18.
You only...
ABC stock is trading at 40. The trader has already sold one put with the strike...
ABC stock is trading at 40. The trader has already sold one put
with the strike price of 40 at 4 with expiry date 1 month from now.
The trader reviews the market and short sells one share. You are
required to analyse the trader's strategy at the time T = 1 month.
Assume the interest rate is flat at 0% pa for all periods. Also
assume that 1 put is on one share
a. Compute the net profit at...
You sold a call option at strike 105 for a price of $3 and sold a...
You sold a call option at strike 105 for a price of $3 and sold
a put option at strike 95 for a price of $2, both options with the
same maturity. In what range of stock prices at maturity will you
make money or not lose (on your net payoff)?
(a) 90 110 (b) 93 102 (c) 95 105 (d) 97 108
A. An investor buys for $3 a put with strike price of $35 and sells for...
A. An investor buys for $3 a put with strike price of $35 and
sells for $1 a put with a strike price of $30. What is this
strategy called? What are the payoffs and profits if the stock
price is above $35, below $30, and between $30 and $35?
B. The common stock of the P.U.T.T. Corporation has been trading
in a narrow price range for the past month, and you are convinced
it is going to break far...
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?...
Consider the following table for calls and puts Call Delta Put Delta Strike price of 40...
Consider the following table for calls and puts
Call Delta
Put Delta
Strike price of 40
0.60
-
0.40
Betty and Bob buy 1000 shares of stock and sell 12 calls.
Algebraically find their Equivalent Share Position.
Algebraically find how many Puts should they buy or sell to be
Delta Neutral.
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
3) You have the potential option to write a put contract with a strike price of...
3) You have the potential option to write a put contract with a
strike price of $35.00 with a expiration day that is in 6 months.
This particular contract is for 100 SH's for the put option. You
receive $2.75 per share for writing the put contract.
A) What is the maximum gain/profits($) from potentially writing
the put option contract?
B) What is your maximum loss potential loss ($) resulting from
writing this contract?
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