Question
In: Finance
Bull call spread strategy: The current stock price of is $78.91, you buy a call option...
Bull call spread strategy: The current stock price of is $78.91, you buy a call option with the expiration of August 21, with the strike price of 72.50$ with ask $11.30, then sell a call for 82.50$ with bid $5.40. You buy a 44 contracts of each call option, with a multiplier of 100. Net Debit: paying $49,720(1,130*44 contracts) and receiving $23,760(540*44)= $25,960
You liquidate the options before expiration on May 20. The stock price on May 20 is 98$. Show calculations of your profit/loss on each position, and the net profit/loss on the portfolio.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
A bull spread strategy is created by buying a European call option on a stock with...
A bull spread strategy is created by buying a European
call option on a stock with a certain strike price and selling a
European call option on the same stock with a higher strike price.
Both options have the same expiration date. Suppose that an
investor buys for £3 a 3-month European call with a strike price of
£29 and sells for £1 a 3-month European call with a strike price of
£34.
What is the total payoff of this...
create a bull call spread using the following quotes: Option type Call on Stock ABC Exercise...
create a bull call spread using the following quotes:
Option type
Call on Stock ABC
Exercise price
$17.50
$20
Option premium
$5.50
$3.50
QUESTION:
- Explain how to create the bull spread by using the
above options.
- Draw the profit and loss diagram of this strategy on
the expiration date and complete the following table.
Profit/Loss and break-even points
P/L & BE points
Strategy
When S≤ $17.50
P/L=
When S≥ $20
P/L=
BE point =
A: A trader creates a bull call spread by buying an option for $12.00 at the...
A: A trader creates a bull call spread by buying an option for
$12.00 at the $100 strike price and selling an option at $5.00 at
the $120 strike price. What is the net payoff per
share (enter 4.00, not 400, for one spread - the gross payoff of
the spread minus the cost of the spread) when the stock price in
six months is $99?
B: A trader creates a bull call spread by buying an option for
$12.00 at...
In a call option bull spread, why is the short option position considered covered?
In a call option bull spread, why is the short option position
considered covered?
What is the option delta? Delta = Spread of Option Price / Spread of Stock price...
What is the option delta? Delta = Spread of Option Price /
Spread of Stock price Spread of Option Price = (40 * 1.2) – 40 = 8
Spread of Stock price = (40 * 1.2) – (40 * 0.833) = 14.7 Delta = 8
/ 14.7 Delta = 0.544 What is (1,2) and (0.833) it this
calculation?
PLEASE ANSWER PART b) Create a bull call spread using the following quotes: Option type Call...
PLEASE ANSWER PART b)
Create a bull call spread using the following quotes:
Option type
Call on Stock ABC
Exercise price
$17.50
$20
Option premium
$5.50
$3.50
part a) Explain how to create the bull spread by using the above
options. Draw the profit and loss diagram of this strategy on the
expiration date and complete the following table.
Profit/Loss and break-even points
P/L & BE points
Strategy
When S≤ $17.50
P/L=
When S≥ $20
P/L=
BE point =
QUESTION...
The price of a stock is $36. You can buy a six-month call option with $33...
The price of a stock is $36. You can buy a six-month call option
with $33 exercise price for $3.2 or a six-month put option with $33
exercise price for $1.2.
(a) What is the intrinsic value of the call option?
(b) What is the intrinsic value of the put option?
(c) What is the time premium paid for the call option?
(d) What is the time premium paid for the put option?
(e) If the price of the stock...
Suppose that you buy a six-month call option on stock Y with an exercise price of...
Suppose that you buy a six-month call option on stock Y with an
exercise price of $80 and sell a six-month call option on Y with an
exercise price of $120. Draw a position diagram showing the payoffs
when the options expire. (Hint: Determine and then add up the
values of the two options given different share prices.)
Suppose you use a call spread strategy on 4/15/2020, by buying a Facebook call option with...
Suppose you use a call spread strategy on 4/15/2020, by buying a
Facebook call option with the strike price of $180 at $7 and
selling a Facebook call option with the strike price of $195 at $2.
Both call options mature on 5/15/2020.
What is your total payoff and profit if Facebook share is traded
at $170 on 5/15/2020 and what is your total payoff and profit if
Facebook share is traded at $185 on 5/15/2020?
Suppose you use a call spread strategy on 4/15/2020, by buying a Facebook call option with...
Suppose you use a call spread strategy on 4/15/2020, by buying a
Facebook call option with the strike price of $180 at $7 and
selling a Facebook call option with the strike price of $195 at $2.
Both call options mature on 5/15/2020.
What is your total payoff and profit if Facebook share is
traded at $170 on 5/15/2020?
What is your total payoff and profit if Facebook share is
traded at $185 on 5/15/2020?
What is your total payoff...
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