Question
In: Finance
Three put options on a stock have the same expiration date and strike prices of $192.5,...
Three put options on a stock have the same expiration date and strike prices of $192.5, $210, and $227.5, and the market prices of the put options are $10.5, $17.5, and $28, respectively.
(a) Explain how a long butterfly spread can be created.
(b) Construct a profit (loss) table for the long butterfly spread strategy at expiration of the options.
(c) Draw the profit (loss) graph for the long butterfly spread strategy at expiration of the options.
(d) For what range of stock prices would the butterfly spread lead to a loss? What is the maximum loss?
(e) For what range of stock prices would the butterfly spread lead to a profit? What is the maximum profit?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Three put options on a stock have the same expiration date and strike prices of $70,...
Three put options on a stock have the same expiration date and
strike prices of $70, $80, and $90 are available at prices of $5,
$7, and $10, respectively. Explain how a butterfly spread can be
created. Construct a table showing the profit from the strategy.
For what range of stock prices would the butterfly spread lead to a
loss? Input your Payoff Table and Draw your payoff diagram :
Three put options on a stock have the same expiration date and strike prices of $70,...
Three put options on a stock have the same expiration date and
strike prices of $70, $80, and $90 are available at prices of $5,
$7, and $10, respectively. Explain how a butterfly spread can be
created. Construct a table showing the profit from the strategy.
For what range of stock prices would the butterfly spread lead to a
loss?
Type your answer here:
Input your Payoff Table here:
Draw your payoff diagram here:
Please give specific and detailed answers...
Three put options on a stock have the same expiration date and strike prices of $50,...
Three put options on a stock have the same expiration date and
strike prices of $50, $60, and $70. The market prices are $3, $5,
and $9, respectively. Harry buys the $50 put, buys the $70 put and
sells two of the $60 puts. Harry's strategy potentially makes money
(i.e. positive profit) in which of the following price ranges?
$40 to $50
$70 to $80
$85 to $95
$55 to $65
Three call options have the same expiration date and strike prices of $13.00, $17.00, and $21.00....
Three call options have the same expiration date and strike
prices of $13.00, $17.00, and $21.00.
a. Explain how to create a butterfly spread from the above
options. Clearly indicate which options should be bought, which
ones should be sold, and in what quantities.
b. Calculate payoff of the spread for the underlying asset
prices of $11.00, $15.00, and $18.00
Given the following 3 put options that have the same expiration date: A: Strike Price =...
Given the following 3 put options that have the same expiration
date:
A: Strike Price = $110, Market Price = $6
B: Strike Price = $120, Market Price = $10
C: Strike Price = $130, Market Price = $16
Explain how a butterfly spread can be created. Create a table in
excel showing the profit from this. What range of stock prices
would lead to a loss from this?
Two call options and two put options on a stock have the same expiration date and...
Two call options and two put options on a stock have the same
expiration date and two strike prices of $187.5 (K1) and $262.5
(K2). The market prices of the call options are $90.5 (c1) and
$13.88 (c2), and the market prices of the put options are $2.1 (p1)
and $77.5 (p2), respectively.
(a) Explain how a long strangle can be created.
(b) Construct a profit (loss) table for the long strangle
strategy at expiration of the options.
(c) Draw...
Three different call options on the same stock with the same expiration date have the following...
Three different call options on the same stock with the same
expiration date have the following strike prices and option
prices:
Strike Price
Call Price
$90
$22.70
$100
$16.20
$110
$13.70
A. Construct a payoff table and draw a profit diagram for an
option strategy where you buy 1 $90 call, buy 1 $110 call, and
write 2 $100 calls.
B. Calculate the payoffs and profits assuming the spot price is $98
at expiry.
C. What is/are the breakeven price(s),...
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.
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