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A bullish AMZN investor would like to have a synthetic long position while limiting downside risk. Based on the same parameters from Question #2, he
A bullish AMZN investor would like to have a synthetic long position while limiting downside risk. Based on the same parameters from Question #2, he decides to buy a 3- month AMZN European call on October 1st to January 1st, 2021. We assume he purchases a call option for $189.82 per share with a strike at the forward price you solved for in 2 a.). a.) Ignoring the time value of money, what is the maximum all-in cost per share for AMZN this investor could face as of January 1, 2021 and what is the associated spot price? b.) Say instead that an existing AMZN investor has a view that the stock is overbought and will decline through year end, and therefore would like to purchase a 3-month AMZN European put option at the same forward strike rate as in a.). How would you value the put option using the parameters provided? c.) Assume instead that the call option in 3 b.) has a one-year tenor instead of three months and the same strike price. How would your answer change versus Question 3 b.)? A bullish AMZN investor would like to have a synthetic long position while limiting downside risk. Based on the same parameters from Question #2, he decides to buy a 3- month AMZN European call on October 1st to January 1st, 2021. We assume he purchases a call option for $189.82 per share with a strike at the forward price you solved for in 2 a.). a.) Ignoring the time value of money, what is the maximum all-in cost per share for AMZN this investor could face as of January 1, 2021 and what is the associated spot price? b.) Say instead that an existing AMZN investor has a view that the stock is overbought and will decline through year end, and therefore would like to purchase a 3-month AMZN European put option at the same forward strike rate as in a.). How would you value the put option using the parameters provided? c.) Assume instead that the call option in 3 b.) has a one-year tenor instead of three months and the same strike price. How would your answer change versus Question 3 b.)
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