3099232 Finance 327: Chapter 16 Fla X C Get Homewo Option X -.s3.amazonaws.com/5af05a7aa8cfe/3099232?response-cache-control-private%2C%20max-age%3D21 FIN 432 - Investments Options Assessment - November 9, 2020 Name: 1. You establish a strangle on CIMBOM by using December call and put options. You buy a call with a strike price of $80 and a put with a strike price of $60. The call option premium is $6 and the put option premium is $4. Current stock price for CIMBOM is $74. A) What is the most you can lose in this position? B) What will be your profit/loss if CIMBOM is trading at $65 when options expire in December? C) What will be your profit/loss if CIMBOM is trading at $85 when options expire in December? D) At what two stock prices will you break even on the strangle? E) What kind of "bet" are you making? (What must you believe about the stock price to justify this position?) s3.amazonaws.com/5af05a7aa8cfe/3099232?response-cache-control-private%2C%20max-age%3 2. You write (sell) a call option with X-$60 and buy a call with X-$80. The options are on the same stock and have the same expiration date. One of the calls sells for $5, the other sells for $20. A) Which of the two calls must be the one selling for $20? B) Draw the payoff graph for this strategy at option expiration as a function of the stock price at that time. 100 BO 60 40 20 Payoff/Profit 0 -20 -40 -60 -80 -100 0 20 120 140 40 60 BO 100 Stock Price at Expiration c) On the same graph, show the profit for this strategy as a function of the stock price? D) What is the break-even point for this strategy? E) Are you bullish or bearish on the underlying stock? Justify your answer. 3099232 Finance 327: Chapter 16 Fla X C Get Homewo Option X -.s3.amazonaws.com/5af05a7aa8cfe/3099232?response-cache-control-private%2C%20max-age%3D21 FIN 432 - Investments Options Assessment - November 9, 2020 Name: 1. You establish a strangle on CIMBOM by using December call and put options. You buy a call with a strike price of $80 and a put with a strike price of $60. The call option premium is $6 and the put option premium is $4. Current stock price for CIMBOM is $74. A) What is the most you can lose in this position? B) What will be your profit/loss if CIMBOM is trading at $65 when options expire in December? C) What will be your profit/loss if CIMBOM is trading at $85 when options expire in December? D) At what two stock prices will you break even on the strangle? E) What kind of "bet" are you making? (What must you believe about the stock price to justify this position?) s3.amazonaws.com/5af05a7aa8cfe/3099232?response-cache-control-private%2C%20max-age%3 2. You write (sell) a call option with X-$60 and buy a call with X-$80. The options are on the same stock and have the same expiration date. One of the calls sells for $5, the other sells for $20. A) Which of the two calls must be the one selling for $20? B) Draw the payoff graph for this strategy at option expiration as a function of the stock price at that time. 100 BO 60 40 20 Payoff/Profit 0 -20 -40 -60 -80 -100 0 20 120 140 40 60 BO 100 Stock Price at Expiration c) On the same graph, show the profit for this strategy as a function of the stock price? D) What is the break-even point for this strategy? E) Are you bullish or bearish on the underlying stock? Justify your