Question
In: Finance
Stock XYZ is currently at $65. Consider two July call options with different strike prices, the...
Stock XYZ is currently at $65. Consider two July call options with different strike prices, the July 60 call and the July 70 call. The price of one call option is $3 and the other is $7.
a. Based on the provided information, what is the price of July 60? What is your reasoning?
b. If a speculator has a view that the stock XYZ will increase moderately, which option you will recommend her to buy? What is the reasoning behind your commendation?
c. If the stock XYZ price increases dramatically to $80 just before option expiration, which option will provide a better return, July 60 call or July 70 call? Show your working process.
d. An investor established a spread by buying a July 60 call and simultaneously selling a July 70 call. Under what circumstance the spread will outperform buying a July 60?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Both a call and a put currently are traded on stock XYZ; bothhave strike prices...
Both a call and a put currently are traded on stock XYZ; both
have strike prices of $44 and maturities of six months.What will be the profit/loss to an investor in the following
scenarios? (Loss amounts should be indicated by a minus sign. )Part 1An investor buys the call for $4.07 and the stock price in six
months is $51.Part 2An investor buys the put for $7.24 and the stock price in six
months is $50.
Both a call and a put currently are traded on stock XYZ; both have strike prices...
Both a call and a put currently are traded on stock XYZ; both
have strike prices of $35 and expirations of 6 months.
a. What will be the profit to an investor who buys
the call for $5 in the following scenarios for stock prices in 6
months? (i) $40; (ii) $45; (iii) $50; (iv) $55; (v) $60.
(Leave no cells blank - be certain to enter "0" wherever
required. Negative amounts should be indicated by a minus sign.
Round...
Both a call and a put currently are traded on stock XYZ; both have strike prices...
Both a call and a put currently are traded on stock XYZ; both
have strike prices of $50 and expirations of 6 months.
a. What will be the profit to an investor who buys
the call for $4.8 in the following scenarios for stock prices in 6
months? (i) $40; (ii) $45; (iii) $50; (iv) $55; (v) $60.
(Leave no cells blank - be certain to enter "0" wherever
required. Negative amounts should be indicated by a minus sign.
Round...
Both a call and a put currently are traded on stock XYZ; both have strike prices...
Both a call and a put currently are traded on stock XYZ; both
have strike prices of $54 and maturities of six months.
a.
What will be the profit/loss to an investor who buys the call
for $4.40 in the following scenarios for stock prices in six
months? (Loss amounts should be indicated by a minus sign.
Round your answers to 2 decimal places.)
Stock Price
Profit/Loss
a.
$44
$
b.
49
c.
54
d....
The current price of XYZ stock is $50, and two-month European call options with a strike...
The current price of XYZ stock is $50, and two-month European
call options with a strike price of $51 currently sell for $10. As
a financial analyst at Merrill Lynch, you are considering two
trading strategies regarding stocks and options. Strategy A
involves buying 100 shares and Strategy B includes buying 500 call
options. Both strategies involve an investment of $5,000.
a. How much is the profit (loss) for strategy A if the stock
closes at $65? (sample answer: $100.25...
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?
Consider two European call options on the same stock with the same strike price of $40....
Consider two European call options on the same stock with the
same strike price of $40. One option has a maturity of 1 month and
the other has a maturity of 3 months. Which option should be more
expensive?
1-month option
3-month option
The two options should have the same premium
More information is needed to determine which option should be
more valuable
Call options on a stock TKM are available with strike prices of $13, $15, $17.5, $18.5...
Call options on a stock TKM are available with strike prices of
$13, $15, $17.5, $18.5 and $20 and expiration dates in three
months. Their prices are $5.5, $4, $2, $1.5 and $0.5 respectively.
Put options on the same stock are available with strike prices of
$24, $23.5, $22.5, $21 and $19 and expiration dates in three
months. Their prices are $5, $4, $2, $1.5 and $0.5 respectively.
TKM is currently trading at $19.40 and assuming the company is in...
Call options on a stock TKM are available with strike prices of $13, $15, $17.5, $18.5...
Call options on a stock TKM are available with strike prices of
$13, $15, $17.5, $18.5 and $20 and expiration dates in three
months. Their prices are $5.5, $4, $2, $1.5 and $0.5 respectively.
Put options on the same stock are available with strike prices of
$24, $23.5, $22.5, $21 and $19 and expiration dates in three
months. Their prices are $5, $4, $2, $1.5 and $0.5 respectively.
TKM is currently trading at $19.40 and assuming the company is in...
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...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- How are the three versions of the Solow Growth Model different? Why do you think we...
- example of a cover letter to a RFP grant proposal
- An Otto Cycle engine operation at cold-air standard has a volume of 0.1908 at the beginning...
- Discuss the current state of the apartment housing market in Strathfield South, Sydney, identifying the drivers...
- how do NGO's lift comunities out of poverty do they eductae? give examples
- Explain in detail some of the national, political, social and business cultures of UAE.
- Explain what Fair Trade seeks to do. State two advantages produced by the Fair Trade model...
ADVERTISEMENT