Homework Answers
Put option is the right available to the buyer to sell the option at the strike price.
1. In the given question, the selling price of the stock is $105
and the put up value is $110, put down value is $90.
If the option value goes up $110, the value of the put option is $105.
If the option value goes down $90, the value of the put option is $90.
2. Call option value = Underlying asset price - stock price
1)The current spot price is $100. You observe 90 Calls selling for $5 and 110 Puts...
1)The current spot price is $100. You observe 90 Calls selling for $5 and 110 Puts selling for $5. Is there an arbitrage possibility? If so, how would you take advantage of it? What are your potential profits? 2)The current spot price is $100. You observe ATM Calls selling for $10 and ATM Puts selling for $7. Does Put-Call Parity hold? a.Given the call price, how much should a put sell for? b.Given the put price, how much should a...
You Just a TD stock at $100 and a put option on the TD stock at $5....
You Just a TD stock at $100 and a put option on the TD stock at $5. The put has exercise price of $108 and expiration date is 6 months from now. Assume that the spot price of the TD stock on expiration date turned to as follows (consider each case separately): Spot price at expiration $85 $90 $95 $100 $105 $110 $115 $120 $125 $130 i. What will be value of put option expiration date under each scenario. ii. What...
A trader creates a long butterfly spread from put options with strike prices of $90, $100,...
A trader creates a long butterfly spread from put options with strike prices of $90, $100, and $110 per share by trading a total of 40 option contracts (buy 10 contracts struck at $90, sell 20 contracts struck at $100 and buy 10 contracts struck at $110). Each contract is written on 100 shares of stock. The options are worth $18, $24, and $32 per share of stock. What is the value of the butterfly spread at maturity as a...
Q1. Uniform Distribution You believe stock price will follow uniform distribution with mean of 100 and...
Q1. Uniform Distribution You believe stock price will follow uniform distribution with mean of 100 and MAD 20. You are pricing a CALL option with strike at 110. a. what is the mean and range of the distribution? b. what is the probability that the call will be ITM at expiration (ie stock price ends above strike at 110)? c. what is the conditional mean of stock price when CALL is ITM (aka stock price is above strike 110)? d....
Shares in Home Depot sell for $110. A call option with one year to maturity and...
Shares in Home Depot sell for $110. A call option with one year to maturity and a $110 strike price sells for $15. A put with the same terms sells for $5. What is the risk free rate? 10% What is the intrinsic and time value of the call? I=0 T=$15 The answers are there but i need the steps on how to solve in order to prepare for an exam
Consider a stock with a price with S = 100 and pays no dividends. The annual...
Consider a stock with a price with S = 100 and pays no dividends. The annual risk-free is 10%. A European put option on the stock with a strike price 90 and an expiration date three months from now has a price of 10. What is the price of a European call option on this stock with the same strike price and expiration date?
the cash price of a one year treasury bill is 95 per 100 of face value....
the
cash price of a one year treasury bill is 95 per 100 of face value.
a 2 year bond with a face value of 100usd that pays annual coupons
of
8. The table below gives today's prices of six-month European put and call options written on a share of ABC stock at different strike prices. The stock does not pay a dividend and the risk-free interest rate is 0% per annum. Put Price (S) Call Price (S) 13.1 9.7...
please type your answer 4. Consider a portfolio consisting of 6 stocks and 10 put options...
please type your answer
4. Consider a portfolio consisting of 6 stocks and 10 put options on the stocks. The current stock price is So = 100 and the stike price of the options is X = 100. The stock price can take on only two values at maturity T given by Su = 120 and Sd = 90. The risk-free rate is given by 5%. (a) What is the payoff at maturity of the portfolio? (b) Calculate the "Delta"...
Assume the following premia: Strike $950 Call $120.405 93.809 84.470 71.802 51.873 Put $51.777 74.201 1000...
Assume the following premia: Strike $950 Call $120.405 93.809 84.470 71.802 51.873 Put $51.777 74.201 1000 1020 84.470 101.214 1050 1107 137.167 I 1) Suppose you invest in the S&P stock index for $1000, buy a 950-strike put, and sell a 1050- strike call. Draw a profit diagram for this position. What is the net option premium? 2) Here is a quote from an investment website about an investment strategy using options: One strategy investors apply is a "synthetic stock."...
3. (10 pts) For each k e [0, 1,2,..., 301 the symbol S(k) denotes the price of the stock at time k. A European call option with strike 90 and expiration n- 30 costs 15. A European put option with...
3. (10 pts) For each k e [0, 1,2,..., 301 the symbol S(k) denotes the price of the stock at time k. A European call option with strike 90 and expiration n- 30 costs 15. A European put option with strike 100 and expiration 30 costs 11. Both options have the same stock as their underlying security. What is the price of the security whose payoff structure is 7S (30) 630, if S(30) 100, S(30)-30, if 90 S(30) S 100,...
the
cash price of a one year treasury bill is 95 per 100 of face value.
a 2 year bond with a face value of 100usd that pays annual coupons
of
8. The table below gives today's prices of six-month European put and call options written on a share of ABC stock at different strike prices. The stock does not pay a dividend and the risk-free interest rate is 0% per annum. Put Price (S) Call Price (S) 13.1 9.7...
please type your answer
4. Consider a portfolio consisting of 6 stocks and 10 put options on the stocks. The current stock price is So = 100 and the stike price of the options is X = 100. The stock price can take on only two values at maturity T given by Su = 120 and Sd = 90. The risk-free rate is given by 5%. (a) What is the payoff at maturity of the portfolio? (b) Calculate the "Delta"...
Assume the following premia: Strike $950 Call $120.405 93.809 84.470 71.802 51.873 Put $51.777 74.201 1000 1020 84.470 101.214 1050 1107 137.167 I 1) Suppose you invest in the S&P stock index for $1000, buy a 950-strike put, and sell a 1050- strike call. Draw a profit diagram for this position. What is the net option premium? 2) Here is a quote from an investment website about an investment strategy using options: One strategy investors apply is a "synthetic stock."...
3. (10 pts) For each k e [0, 1,2,..., 301 the symbol S(k) denotes the price of the stock at time k. A European call option with strike 90 and expiration n- 30 costs 15. A European put option with strike 100 and expiration 30 costs 11. Both options have the same stock as their underlying security. What is the price of the security whose payoff structure is 7S (30) 630, if S(30) 100, S(30)-30, if 90 S(30) S 100,...
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