Question
In: Finance
A trader writes seven naked put option contracts, with each contract being on 100 shares. The...
A trader writes seven naked put option contracts, with each contract being on 100 shares. The option price is $5, the time to maturity is eight months, and the strike price is $35. 2 a) What is the margin requirement if the stock price is $41? b) How would the answer to a) change if the stock price were $30? c) How would the answer to a) change if the trader is buying instead of selling the options?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
A trader has a call option contract to sell 100 shares of a stock for a...
A trader has a call option contract to sell 100 shares of a
stock for a strike price of $50. What is the effect on the terms of
the contract of the following events?
(a) A $5 dividend being paid
(b) A 5-for-4 stock split
(c) A 10% stock dividend being paid.
A trader has a call option contract to sell 100 shares of a stock for a...
A trader has a call option contract to sell 100 shares of a
stock for a strike price of $50. What is the effect on the terms of
the contract of the following events?
(a) A $5 dividend being paid
(b) A 5-for-4 stock split
(c) A 10% stock dividend being paid.
The price of a stock (S0) is $75. A trader sells 6 (N) put option contracts...
The price of a stock (S0) is $75. A trader sells 6 (N) put
option contracts (each contract of 100) on the stock with a strike
price (K) of $78 when the option price (c) is $5. The options are
exercised when the stock price (S1) is $74. What is the trader’s
net profit or loss?
Solve in following 4 steps.
a) Option profit = K – S0
___________________________________________________
b) Trader’s gain per option = c – (K – S0)...
Suppose you purchased two call option contracts (100 shares per contract) with $15 strike price at...
Suppose you purchased two call option contracts (100 shares per
contract) with $15 strike price at a quoted price of $0.08
premium/share. What is your total profit on this investment if the
price is $14.80 on the option expiration date?
You bought one of the $100 Apple put option contracts with a premium of $3.69. You...
You bought one of the $100 Apple put option contracts with a
premium of $3.69. You kept your position until the expiration date,
when Apple stock sells for $91.68, at that point you have a profit
of $_____________ from this transaction. Recall that
each contract includes 100
shares. Enter a negative
number for losses. Enter your answer in the box
below. Round your answer to two
decimals.
Q3. Suppose you write 30 put option contracts with a strike of $100 and expiring in...
Q3. Suppose you write 30 put option contracts with a strike of
$100 and expiring in 3 months. The put options are trading at
$4.80. What is your net gain/loss if the underlying stock price at
maturity is $110? What is the break-even price when your profit
from this investment is zero?
Q4. A strangle is created by buying a put option, and buying a
call on the same stock with higher strike price and same
expiration. A put with...
trader buys two July futures contracts on frozen orange juice. Each contract is for the delivery...
trader buys two July futures contracts on frozen orange juice.
Each contract is for the delivery of 15,000 pounds. The current
futures price is 160 cents per pound, the initial margin is $6,000
per contract, and the maintenance margin is $4,500 per contract.
What price change would lead to a margin call? Under what
circumstances could $2,000 be withdrawn from the margin
account?
You bought 100 Google Shares for $400 each. You also bought 1 put option on Google...
You bought 100 Google Shares for $400 each. You also bought 1
put option on Google with a strike of $395 for $20.
a) What is the
maximum loss on your position?
b) What is the profit
on your position when the stock hits $440?
c) Draw the profit/loss
diagram for this position clearly marking the maximum loss, and
breakeven
Suppose the price of Apple’s common shares is $180/share. The call option contract (involves 100 shares)...
Suppose the price of Apple’s common shares is $180/share. The
call option contract
(involves 100 shares) on Apple, with a strike price of $195/share
is $10/contract. With the
$180 you have, you are looking at two choices:
A: Buy one share of Apple’s common stock
B: Buy 18 call option contracts
(1) What are the rates of return on A and B if the share price has
dropped to $170/share?
(2) What are the rates of return on A and...
The price of a stock on October 1st is $48. A trader sells a put option...
The price of a stock on October 1st is $48. A trader sells a put
option contract (comprised of 200 shares) with a strike price of
$40 when the option premium is $2/share. The put option is
exercised when the stock price is $39. What is the trader’s net
profit or loss?
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