Question
In: Finance
Suppose that call options on ExxonMobil stock with time to expiration 6 months and strike price...
Suppose that call options on ExxonMobil stock with time to expiration 6 months and strike price $99 are selling at an implied volatility of 31%. ExxonMobil stock currently is $99 per share, and the risk-free rate is 3%. If you believe the true volatility of the stock is 34%
a. If you believe the true volatility of the stock is 34%, would you want to buy or sell call options?
b. Now you need to hedge your option position against changes in the stock price. How many shares of stock will you hold for each option contract purchased or sold? (Round your answer to 4 decimal places.)
Number of shares___________
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
Suppose that call options on ExxonMobil stock with time to expiration 6 months and strike price...
Suppose that call options on ExxonMobil stock with time to
expiration 6 months and strike price $97 are selling at an implied
volatility of 29%. ExxonMobil stock currently is $97 per share, and
the risk-free rate is 6%. If you believe the true volatility of the
stock is 31%.
a. If you believe the true volatility of the stock is 31%, would
you want to buy or sell call options?
b. Now you need to hedge your option position against...
Suppose that call options on ExxonMobil stock with time to expiration 3 months and strike price...
Suppose that call options on ExxonMobil stock with
time to expiration 3 months and strike price R90. ExxonMobil stock
currently is R90 per share, and the risk-free rate is 4%. If you
believe the true volatility of the stock is 32%, Calculate the
value to call option using the Black Scholes model.
-European call and put options with 3 months of expiration exist with strike price $30 on...
-European call and put options with 3 months of expiration exist
with strike price $30 on the same underlying stock. The call is
priced at $3.5, the put is priced at $1.25, while the underlying is
currently selling for $28.5.
a) What is the net profit for the buyer of the call if the stock
price at expiration is $36?
b) What is the net profit for the seller of the call if the
stock price at expiration is $38?...
A call on a stock with stock price $25.93 has a strike price $22 and expiration...
A call on a stock with stock price $25.93 has a strike price $22
and expiration 230 days from today, available for a premium of $7.
The stock also has a put with the same strike price and expiration
as the above call, available for a put premium of $3.56. Both
options are European, there are no dividends paid on the stock, and
the interest rate for the expiration period is 8% per year. How
much could you make per...
A stock is selling for $32.70. The strike price on a call, maturing in 6 months,...
A stock is selling for $32.70. The strike price on a call,
maturing in 6 months, is $35. The possible stock prices at the end
of 6 months are $39.50 and $28.40. If interest rates are 6.0%, what
is the option price? Show work
According the the text book the correct answer is $3.40 but how
do you get to this answer
Suppose that a 6-month European call A option on a stock with a strike price of...
Suppose that a 6-month European call A option on a stock with a
strike price of $75 costs $5 and is held until maturity, and
6-month European call B option on a stock with a strike price of
$80 costs $3 and is held until maturity. The underlying stock price
is $73 with a volatility of 15%. Risk-free interest rates (all
maturities) are 10% per annum with continuous compounding.
(a) Construct a butterfly spread with the two kinds of options....
Suppose that a 6-month European call A option on a stock with a strike price of...
Suppose that a 6-month European call A option on a stock with
a strike price of $75 costs $5 and is held until maturity, and
6-month European call B option on a stock with a strike price of
$80 costs $3 and is held until maturity. The underlying stock price
is $73 with a volatility of 15%. Risk-free interest rates (all
maturities) are 10% per annum with continuous compounding.
(a) Construct a butterfly spread with the two kinds of
options....
Given the following: Call Option: Strike Price = $60, expiration costs $6 Put Option: Strike Price...
Given the following:
Call Option: Strike Price = $60, expiration costs $6
Put Option: Strike Price = $60, expiration costs $4
In excel, show the profit from a straddle for this. What range
of stock prices would lead to a loss for this?
Including a graph would be helpful.
A call option on a stock expires in 4 months with a strike price of 75....
A call option on a stock expires in 4 months with a strike price
of 75. The price of the stock is 80, and the interest rate is 4
percent. Graph the value of this option as the standard deviation
of the underlying stock goes from 10 to 50 percent.
6) A stock is selling for $18.50. The strike price on a call, maturing in 6...
6) A stock is selling for $18.50. The strike price on a call,
maturing in 6 months, is $20. The possible stock prices at the end
of 6 months are $22.50 and $15.00. Interest rates are 6.0%. How
much money would you borrow to create an arbitrage on a call
trading for $2.00?
A) $2.54
B) $4.85
C) $6.60
D) $8.85
Answer: B need details of solution
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