Suppose you believe that Du Pont's stock price is going to decline from its current level...

Suppose you believe that Du Pont's stock price is going to decline from its current level of $ 84.57 sometime during the next 5 months. For $ 462.82 you could buy a 5-month put option giving you the right to sell 100 shares at a price of $ 78 per share. If you bought a 100-share contract for $ 462.82 and Du Pont's stock price actually changed to $ 87.64 at the end of five months, your net profit (or loss) after behaving rationally on the decision to exercise the option would be ______? Show your answer to the nearest .01. Do not use $ or , signs in your answer. Use a - sign if you lose money on the contract. Your Answer:

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jeff jeffy answered 2 years ago

Suppose you believe that Johnson Company's stock price is going to increase from its current level...

Suppose you believe that Johnson Company's stock price is going to increase from its current level of $40 sometime during the next 5 months. For $400 you can buy a 5-month call option giving you the right to buy 100 shares at a price of $60 per share. If you buy this option for $500 and Johnson's stock price actually rises to $70, would you exercise your call option? AND what would be your pre-tax net profit or loss from...

Suppose you believe that Bennett Environmental's stock price is going to increase from its current level of $ 36.47 sometime during the next 7 months.

Suppose you believe that Bennett Environmental's stock price is going to increase from its current level of $ 36.47 sometime during the next 7 months. For $ 235.32 you could buy a 7-month call option giving you the right to buy 100 shares at a price of $ 27 per share. If you bought a 100-share contract for $ 235.32 and Bennett's stock price actually changed to $ 29.03 , your net profit (or loss) after exercising the option would...

X-Ray Inc. stock currently sells for $49, but you believe its price will decline over the...

X-Ray Inc. stock currently sells for $49, but you believe its price will decline over the next six months. You decide to use 10 six-month European put options to speculate on your belief. Each put option carries an exercise price and premium of $44 and $.80, respectively. Which of the following best describes the initial position you should take with the put contracts? Sell 10 put options and receive $800 in option premiums. Buy 10 put options and receive $800...

Based on your analysis, you estimate Wavemobile's stock price is going to increase from its current...

Based on your analysis, you estimate Wavemobile's stock price is going to increase from its current level of $18 sometime during the next three months. You can buy a 3-month call option giving you the right to buy 1 share at a price of $32 per share. If Wavemobile's stock price increases to $59, what would the exercise value be?

You believe the price of Freeze Frame Co. stock is going to fall, so you short...

You believe the price of Freeze Frame Co. stock is going to fall, so you short 650 shares at a price of $63. The initial margin is 55 percent. Ignore dividends. a. Construct the equity balance sheet for the original trade. (Input all amounts as positive values.) b-1. Construct an equity balance sheet for a stock price of $59 per share. (Input all amounts as positive values.) b-2. What is your margin? (Do not round intermediate calculations. Enter your answer...

You believe ABC stock will likely go up in the near term. The current stock price...

You believe ABC stock will likely go up in the near term. The current stock price is $25. You decide to buy 10 ABC option contracts with $24 strike price that expires in 6 months. You are paying $2 per share call premium for the option. a) What’s the intrinsic value of this call option? b) What’s the breakeven stock price? c) Draw an option pay-off diagram of this long call position; d) If 6 months later, the stock price...

Eagletron's current stock price is $10. Suppose that over the current year, the stock price will...

Eagletron's current stock price is $10. Suppose that over the current year, the stock price will either increase by 95% or decrease by 45%. Also, the risk-free rate is 25 %25% (EAR). a. What is the value today of a one-year at-the-money European put option on Eagletron stock? b. What is the value today of a one-year European put option on Eagletron stock with a strike price of $ 19.50$19.50? c. Suppose the put options in parts (a) and (b)...

suppose that you believe that interest rates are going to fall in the future and you...

suppose that you believe that interest rates are going to fall in the future and you must choose between two bond investment, options a) and b) which of the two bond investment options would you select and why? A) Buy 10 bonds with 6% coupon rate, thirty-years to maturity, $100 face value, and pay semi annual coupons B) buy 1 bond with a 4% coupon rate, thirty-years to maturity, $1,000 face value, and pay semi annual coupons

Suppose the current stock price is $120 and the stock price in a year can be...

Suppose the current stock price is $120 and the stock price in a year can be either $150 or $100. The risk-free rate is 2% per year, compounded annually. Compute the price of a European put option that expires in a year. The strike price is K=$130 (Hint: This is a put option case, not a call option. Be careful when you compute the cash-flow at expiration date. All other calculations should be the same as call option case.)

Disney, ticker DIS, closed at around $110 on 5/8. You believe its share price is going...

Disney, ticker DIS, closed at around $110 on 5/8. You believe its share price is going to stay in a narrow range around $110 for the next year. To speculate on your belief, you decide to sell a straddle. The straddle strategy is entering the same position in both a call and a put sharing the same underlying, expiration, and strike price. When you sell a straddle, you are selling both the call and the put. The price of a...

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