Deliverable 5 Calculating prices of options using the Black Scholes Option Pricing Model:

1. 1. 1. 1. For each option in the strategy, substitute the five inputs, i.e. the current stock price (S), the strike price (E), the annualized volatility of returns on the stock (), the annualized risk-free rate ( ), and the time to expiration expressed in annual terms (T) into the Black Scholes formula to calculate the options price.

         2. In your report and presentation, show details of these calculations, using regular (NOT Excel) formulas. First, write necessary formulas using symbols and then present the same formulas with the numerical values of the five parameters plugged into them.

            Deliverable 6 Break-even points, maximum profit and loss calculations:

            1. Using prices of options from Deliverable 5, calculate the cost of the strategy.

            2. Find the breakeven points for the strategy. This means that you need to calculate the prices of the underlying stock, at which your strategy results in zero profit/loss.

            3. Find the maximum profit for your strategy and indicate the range of prices at which you can earn this maximum profit.

            4. Find the maximum loss for your strategy and indicate the range of prices at which the strategy will experience this maximum loss.

            5. Construct the profit/loss graph for your strategy.

            
            

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