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Could you please do all of these questions , i really appreciate that, thumbs up for sure:) many thanks!n :) Question 3. Answer saved Marked
Could you please do all of these questions , i really appreciate that, thumbs up for sure:) many thanks!n :)
Question 3. Answer saved Marked out of 12:00 Flag question In January 2022, Company Monash's stock is traded at $150. The following table provides the premiums of March, April, and May maturity options with different strike prices on Company Monash's stock. Based on the current market conditions, you would like to construct the following option trading strategy: Short Strip using April maturity options. (Required: In parts b-e and h, use the values of strike and premium of the option(s) that you select in part a) Calls Puts Strike March April May March April May 145 6 9 12 0.5 4 3 150 3 7.5 9.5 1.5 4.5 6 155 1.5 6 8.5 3 7.5 9.5 (a) Describe how to construct the strategy. Which call and/or put is (are) used? (b) Show the net payoff function of the strategy. (c) Fill in the net payoff table. (Required: show the net payoff of each option used to construct the strategy and the overall net payoff of the strategy) (d) What are the maximal profit and the maximal loss of the strategy? (Required: show how to calculate the value(s) if it is applicable) When does the strategy make a profit? (Required: show how to calculate the value(s) if it is applicable) (e) (f) What is your expectation of Company Monash's stock price movement when you construct the strategy? (g) After constructing the above trading strategy, the share price is not changed. However, your expectation is changed, and you would like to construct a short Straddle instead. Describe a shortcut way to construct the new strategy by adjusting the existing trading strategy. Which call and/or put is (are) used? Explain. (h) Suppose you constructed a short Strap rather than a short Strip in January 2022. Explain when the new strategy leads you to a better outcome than the original one? If the stock price changes to 160, how much more/less profit do you make for the new strategy than the original one? (Required: show how to calculate the value(s) if it is applicable) (1+1+3 Question 3. Answer saved Marked out of 12:00 Flag question In January 2022, Company Monash's stock is traded at $150. The following table provides the premiums of March, April, and May maturity options with different strike prices on Company Monash's stock. Based on the current market conditions, you would like to construct the following option trading strategy: Short Strip using April maturity options. (Required: In parts b-e and h, use the values of strike and premium of the option(s) that you select in part a) Calls Puts Strike March April May March April May 145 6 9 12 0.5 4 3 150 3 7.5 9.5 1.5 4.5 6 155 1.5 6 8.5 3 7.5 9.5 (a) Describe how to construct the strategy. Which call and/or put is (are) used? (b) Show the net payoff function of the strategy. (c) Fill in the net payoff table. (Required: show the net payoff of each option used to construct the strategy and the overall net payoff of the strategy) (d) What are the maximal profit and the maximal loss of the strategy? (Required: show how to calculate the value(s) if it is applicable) When does the strategy make a profit? (Required: show how to calculate the value(s) if it is applicable) (e) (f) What is your expectation of Company Monash's stock price movement when you construct the strategy? (g) After constructing the above trading strategy, the share price is not changed. However, your expectation is changed, and you would like to construct a short Straddle instead. Describe a shortcut way to construct the new strategy by adjusting the existing trading strategy. Which call and/or put is (are) used? Explain. (h) Suppose you constructed a short Strap rather than a short Strip in January 2022. Explain when the new strategy leads you to a better outcome than the original one? If the stock price changes to 160, how much more/less profit do you make for the new strategy than the original one? (Required: show how to calculate the value(s) if it is applicable) (1+1+3 Step by Step Solution
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