Question

In: Finance

A trader buys 200 put options on a stock with a strike price of $100 when...

A trader buys 200 put options on a stock with a strike price of $100 when the option price is $3 and the stock price is $102. The trader holds the options to the maturity date when the stock price is $107. What is the trader’s net profit or loss?

Solutions

Expert Solution

Strike price = $100

Spot price = $107

option premium = $3

No of put options = 200

At expiry(maturity) date

Profit / Loss of the trader = (max(Strike price - Spot price, 0) - option premium) * No of put options

Profit / Loss of the trader = (max($100 - $107, 0) - $3) * 200

Profit / Loss of the trader = -$600

Loss of the trader = $600

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

A trader buys a put on a stock having a certain strike price and buys a...
A trader buys a put on a stock having a certain strike price and buys a put on the same stock having a higher strike price. She also writes (sells) two puts having a strike price in the middle of the other two strike prices.             a. Illustrate the resulting payoff pattern (profits for different possible stock prices at the expiration date) this position will give the trader. Explain.             b. If you didn’t include the answer to this question...
A trader creates a long strangle with put options with a strike price of $160 per...
A trader creates a long strangle with put options with a strike price of $160 per share, and call options with a strike of $170 per share by trading a total of 30 option contracts (15 put contracts and 15 call contracts). Each contract is written on 100 shares of stock. The put option is worth $13 per share, and the call option is worth $11 per share. What is the value of the strangle at maturity as a function...
A trader creates a long strangle with put options with a strike price of $160 per...
A trader creates a long strangle with put options with a strike price of $160 per share, and call options with a strike of $170 per share by trading a total of 30 option contracts (15 put contracts and 15 call contracts). Each contract is written on 100 shares of stock. The put option is worth $13 per share, and the call option is worth $11 per share. A. What is the value of the strangle at maturity as a...
A trader observes that a) A put on stock X which does not pay dividends with strike price
  A trader observes that a) A put on stock X which does not pay dividends with strike price$20 and exercisable in one year trades at $3 and b) A call on the same stock with the same strikeprice and also exercisable in one year trades at $25. If the stock trades today at $30/share and therisk-free rate is 10%, design a profitable arbitrage strategy for the trader.
Stock price today at $100. A binary PUT with strike of 85 is priced at $0.15....
Stock price today at $100. A binary PUT with strike of 85 is priced at $0.15. What is the implied standard deviation?
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...
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...
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 own a put option on Ford stock with a strike price of ​$99. When you...
You own a put option on Ford stock with a strike price of ​$99. When you bought the​ put, its cost to you was ​$33. The option will expire in exactly six​ months' time. a. If the stock is trading at ​$22 in six​ months, what will be the payoff of the​ put? What will be the profit of the​ put? b. If the stock is trading at ​$2020 in six​ months, what will be the payoff of the​ put?...
1. A trader creates a long butterfly spread from options with strike prices of $90, $100,...
1. A trader creates a long butterfly spread from options with strike prices of $90, $100, and $110 per share by trading a total of 20 option contracts (buy 5 contracts at $90, sell 10 contracts at $100 and buy 5 contracts at $110). Each contract is written on 100 shares of stock. The options are worth $15, $18, and $22 per share of stock, respectively. a) What is the value of the butterfly spread at maturity as a function...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT