The following table shows option quotes for the November soybean contract. Please create a bear spread....

The following table shows option quotes for the November soybean contract.
1. Please create a bear spread. What positions in what contracts would you take?
2. What is the cost of your position? (Remember, there are at least two correct
  
  combinations of strikes that you could use in this problem
3. Calls
  
  Strike
  
  Puts
  
  52.5
  
  910
  
  31.25
  
  47.5
  
  920
  
  35.25
  
  43.75
  
  930
  
  43.75
  
  38.25
  
  940
  
  45.75
  
  34.5
  
  950
  
  51.75
4. Now with the same option quotes, create a long straddle position. At the money is 930.
  1. What positions in what contracts would you take?
  2. What is the cost of your position?

Expert Solution


	BEAR SPREAD WITH PUTS

	Strategy:1	Premium
	Buy Put Option at Strike Price 930	-43.75
	Sell Put Option at strike Price 920	35.25
	Net Premium	-8.5
	Strategy 2	Premium
	Buy Put Option at Strike Price 930	-43.75
	Sell Put Option at strike Price 910	31.25
	Net Premium	-12.5
	Bear Spread is used when the trader expects share price willmove downwards
	Cost of position of Bear Spread Strategy1	8.5
	Cost of position of Bear Spread Strategy2	12.5

	LONG STRADDLE STRATEGY	Premium
	BUY Call option at strike price 930	-43.75
	BUY Put option at strike price 930	-43.75
	Net Premium	-87.5
	Long Straddle is used when the trader expects high volatility in share price .
	Cost of position Long Straddle	87.5

jeff jeffy answered 8 months ago

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