Question
8. A European call option and put option on the stock both have a strike price of $20 and an expiration date in three months.
8. A European call option and put option on the stock both have a strike price of $20 and an expiration date in three months. Both sell for $3.00. The risk-free interest rate is 10% per annum, the current stock price is $19, and a $1.00 dividend is expected in one month. What arbitrage profit is available? ____________
9. A call option with a strike price of $50 costs two dollars. A put option with a strike price of $45 cost three dollars. Create a short strangle from these two options.
What are the breakeven points? _________and ___________
What will be the profit if the price is $47.30 at expiration? ___________
What will be the profit if the price is $39.40 at expiration? ___________
What will be the profit if the price is $54.19 at expiration? ___________
10. Use the options prices for Spotify Technoloogy to create a bear spread using the put options with strike prices 170 and 175. Be sure to use the appropriate bid and ask prices.
What will be your cash flow per share when you set up the position? Show all cash flows: inflows, outflows, and net flow. Inflow ___________
Net Flow___________
The maximum profit on the put bear spread is ___________
The minimum profit on the put bear spread is ___________
The breakeven point on the put bear spread is ___________
What will be your gain or loss per share on the net position if at expiration the price of Spotify is $172.25? ___________
11. Use the options prices for Spotify to create a bull spread using call options with 155 and 160 strike prices. Be sure to use the appropriate bid and ask prices.
What will be your cash flow per share when you set up the position? Show all cash flows: inflows, outflows, and net flow.
Inflow ___________
Net Flow ___________
The maximum profit on the call bull spread is ___________
The minimum profit on the call bull spread is ___________
The breakeven point on the call bull spread is ____________
What will be your profit per share on the net position if at expiration the price of the stock is $157.3?
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