Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Hedging/Option Help Hey. I was wondering if somone could help show me how to set up a bear money spread for the question below. I
Hedging/Option Help
Hey. I was wondering if somone could help show me how to set up a bear money spread for the question below. I am fairly confused on this HW problem. Any insigh you can show me would be greatly recieved.
Please see the attached screen below of the problem. BIG THUMBS UP to anyone can help...the really understands options.
The following option prices were observed for a stock on July 6 of a particular year Use this information for the following problems. Unless otherwise indicated, ignore dividends on the stock. The stock is priced at: 165.13 The expirations and associated risk free rates for each term are: Date Rate 5.16% 21-Aug 5.88% Calls Strike Oct Ju Aug Oct Ju Aug 160 6.00 8.10 11.10 0.75 2.75 4.50 8.10 2.35 4.70 670 2.70 5.20 165 170 0.80 3.20 600 9.00 7.50 In the following problems, determine the profits for possible stock prices of 140,145, 150, 155, 160, 165, 170, 175, and 180. Answer any other questions as requested. Problem Construct a bear money spread using October 1 and 170 calls. Hold the position until the options expire Determine the profits and graph the results. Identify the breakeven stock price at expiration and the maximum and minimum profits. Discuss any special considerations associated with this strategy. Option value at expiration Profit on 100 long Ending Stock Price october 170 (ong) October 165 (short) calls at 170 and 100 short calls at 165 140 150
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started