On December 21, 2020, you purchased 100 shares of ABC company at $11 per share. You...
On December 21, 2020, you purchased 100 shares of ABC company at $11 per share. You plan to sell your shares on December 21, 2021 and are concerned about downside risk. A put option on ABC stock with an exercise price (K) of $40 is currently priced (P) at $2 per share. Also, two call options on ABC stock with exercise prices (K) of $40 and $65 are priced (C) at $2.5 and $1.50 per share, respectively. All options expire on December 21, 2021. What will be net profit/loss per share on a long bull call spread if the stock price is $70 per share?
| A. |
$14 |
|
| B. |
$24 |
|
| C. |
$34 |
|
| D. |
$44 |
Homework Answers
Call spread: buy $40 strike call option and sell $65 strike call option.
Both options are exercised.
Profit on $40 call bought = 70 – 40 = 30
Loss on $65 call sold = 65 – 70 = -5
Net profit = 30 – 5 – 2.5 + 1.5 = $24
Answer is $24
Please rate.
Add Answer to:
On December 21, 2020, you purchased 100 shares of ABC company at
$11 per share. You...
Shares of XYZ are currently trading at $19.29 per share. You open a butterfly spread position...
Shares of XYZ are currently trading at $19.29 per share. You open a butterfly spread position because you believe the stock price will remain stable for the next month. You long a $3.40 call option with a strike price of $16.00. You short two $0.92 call options with a strike price of $19.00. You long a $0.09 call option with a strike price of $22.00. If at maturity, XYZ shares are trading at $17.00 per share, what is the final...
On December 31, 2020. Berclair Inc. had 540 million shares of common stock and 21 million...
On December 31, 2020. Berclair Inc. had 540 million shares of common stock and 21 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2021. Berclair purchased 24 milion shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2021. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2021, was $1,050 million Also outstanding at December...
2) You sell short 100 shares of ABC stock at $40 per share. The initial margin...
2) You sell short 100 shares of ABC stock at $40 per share. The initial margin is 50% and the maintenance margin is 40% How much do you post at the margin account as your initial margin per share? (20points) II) At what price will you get a margin call? (30points)
(11 Suppose that Facebook stock is currently priced at $170 per share and you have bought...
(11 Suppose that Facebook stock is currently priced at $170 per share and you have bought a put option with the strike price at $150 per share. The option premium is $10. The intrinsic value of your option is A) -$10. B) $0. C) $10. D) $20. One share of General Electric stock is priced at $10 today. Both options below are on General Electric stock and expire in 3 months. Option A Option B Type Call option Put option...
On December 31, 2020, Dow Steel Corporation had 680,000 shares of common stock and 308,000 shares of 8%, noncumulative,...
On December 31, 2020, Dow Steel Corporation had 680,000 shares of common stock and 308,000 shares of 8%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 4% common stock dividend on May 15 and paid cash dividends of $480,000 and $77,000 to common and preferred shareholders, respectively, on December 15, 2021. On February 28, 2021, Dow sold 54,000 common shares. In keeping with its long-term share repurchase plan, 4,000 shares were retired on July 1. Dow's net income...
The common shares of Twitter, Inc. (TWTR) recently traded on the NYSE for $21.70 per share....
The common shares of Twitter, Inc. (TWTR) recently traded on the NYSE for $21.70 per share. You have employee stock options to purchase 1,000 TWTR shares for $20.8 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 88.6 percent and that the interest rate is 2.6 percent. (Assume the options are European options that may only be exercised at the maturity date.) a. Is this option a call or a put? Call...
The common shares of Twitter, Inc. (TWTR) recently traded on the NYSE for $20.10 per share. You have employee stock opti...
The common shares of Twitter, Inc. (TWTR) recently traded on the NYSE for $20.10 per share. You have employee stock options to purchase 1,000 TWTR shares for $18.4 per share. The options expire in three years. Assume that the annualized volatility of TWTR stock is 87.0 percent and that the interest rate is 3.3 percent. (Assume the options are European options that may only be exercised at the maturity date.) a. Is this option a call or a put? Call...
1. Apple stock is selling for $120 per share. Call options with a $117 exercise price...
1. Apple stock is selling for $120 per share. Call options with a $117 exercise price are priced at $12. What is the intrinsic value of the option, and what is the time value? 2. Twitter is trading at $34.50. Call options with a strike price of $35 are priced at $2.30. What is the intrinsic value of the option, and what is the time value?
On December 31, 2020, Berclair Inc. had 520 million shares of common stock and 3 million...
On December 31, 2020, Berclair Inc. had 520 million shares of common stock and 3 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2021, Berclair purchased 24 million shares of its common stock as treasury stock Berclair issued a 5% common stock dividend on July 1, 2021. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2021. was $850 million. The income tax rate...
I need help Suppose you own 100,000 shares of a stock selling for $20 a share....
I need help Suppose you own 100,000 shares of a stock selling for $20 a share. You also purchased a PUT option for each share of stock for $4 per share. Strike price (exercise price) is $20. At option expiration, the stock is selling for $15. What should you do regarding the put? Sell the put Exercise the put Buy more put options to offset the loss on the stock Let the put option expire unexercised The transaction above is...
Shares of XYZ are currently trading at $19.29 per share. You open a butterfly spread position because you believe the stock price will remain stable for the next month. You long a $3.40 call option with a strike price of $16.00. You short two $0.92 call options with a strike price of $19.00. You long a $0.09 call option with a strike price of $22.00. If at maturity, XYZ shares are trading at $17.00 per share, what is the final...
On December 31, 2020. Berclair Inc. had 540 million shares of common stock and 21 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2021. Berclair purchased 24 milion shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2021. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2021, was $1,050 million Also outstanding at December...
2) You sell short 100 shares of ABC stock at $40 per share. The initial margin is 50% and the maintenance margin is 40% How much do you post at the margin account as your initial margin per share? (20points) II) At what price will you get a margin call? (30points)
(11 Suppose that Facebook stock is currently priced at $170 per share and you have bought a put option with the strike price at $150 per share. The option premium is $10. The intrinsic value of your option is A) -$10. B) $0. C) $10. D) $20. One share of General Electric stock is priced at $10 today. Both options below are on General Electric stock and expire in 3 months. Option A Option B Type Call option Put option...
On December 31, 2020, Berclair Inc. had 520 million shares of common stock and 3 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2021, Berclair purchased 24 million shares of its common stock as treasury stock Berclair issued a 5% common stock dividend on July 1, 2021. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2021. was $850 million. The income tax rate...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 11 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 11 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 11 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 11 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 11 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 11 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 11 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 11 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 11 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 11 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 11 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 11 months ago