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Financial Mathematics. please do hand calculations. 1) Buying a put option and selling a call option are both considered a way of expressing a bearish
Financial Mathematics. please do hand calculations.
1) Buying a put option and selling a call option are both considered a way of expressing a bearish view on a stock (i.e., that its price will decline). Draw the hockey-sticks for both buying a put and selling a call in terms of the stock price at expiry S(T), the strike (X), and the premium (C/P). Be sure to label the graphs including breakeven points and upside/downside. 2) What is the difference between using a call option versus a forward contract to buy a stock at a future date T. What are the pros and cons of both. 3) Suppose a stock's price (0) = $23 and you purchase a call option with strike X = 25 for $5 and also sell a call option with strike X = 35 for $1. Draw the hockey-stick/payoff diagram. 1) Buying a put option and selling a call option are both considered a way of expressing a bearish view on a stock (i.e., that its price will decline). Draw the hockey-sticks for both buying a put and selling a call in terms of the stock price at expiry S(T), the strike (X), and the premium (C/P). Be sure to label the graphs including breakeven points and upside/downside. 2) What is the difference between using a call option versus a forward contract to buy a stock at a future date T. What are the pros and cons of both. 3) Suppose a stock's price (0) = $23 and you purchase a call option with strike X = 25 for $5 and also sell a call option with strike X = 35 for $1. Draw the hockey-stick/payoff diagram Step by Step Solution
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