Using the parameters in the header of Table 5.1, except for the drift, and analyze the OTM
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Using the parameters in the header of Table 5.1, except for the drift, and analyze the OTM call trade (85 strike) for various values of drift; for example μ = 0.02, μ = 0.04, and μ = 0.06.
Data given in Table 5.1
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Table 5.1 Gain expectation for put and call options for the calls: So = $80, T = 20(days), p=8%, r = 1%, o = 20% Trade Strike Price Time Amt Prob. of Prob. of Ex- (strike VS value at total a gain pected p/c) stock loss (%) (%) gain ITM ATM risk 75 call 5.18 0.18 5.18 80 call 1.52 1.52 1.52 85 call OTM 0.18 0.18 0.18 8 47 89 51 37 10 9 47 91 0.283 0.161 0.034 for the puts: So = $80, T = 20(days), μ = -4%, r = 1%, o = 20% 85 put ITM 5.14 0.14 5.14 51 0.188 80 put ATM 1.47 1.47 1.47 37 0.110 75 put OTM 0.14 0.14 0.14 9 0.019 Gain rate (%) 100 193 344 67 137 249
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alright based on the data in Table 51 for an OTM call trade 85 strike heres the analysis for various ...View the full answer
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