Question
Here are quotes for some options on ROKU CALLS STRIKE PUTS bid ask bid ask 2.92 3.20 120 0.12 0.15 2.03 2.26 121 0.24 0.30
Here are quotes for some options on ROKU
CALLS | STRIKE | PUTS | ||
bid | ask | bid | ask | |
2.92 | 3.20 | 120 | 0.12 | 0.15 |
2.03 | 2.26 | 121 | 0.24 | 0.30 |
1.37 | 1.53 | 122 | 0.49 | 0.58 |
0.86 | 0.95 | 123 | 0.93 | 1.03 |
0.52 | 0.58 | 124 | 1.57 | 1.73 |
0.32 | 0.37 | 125 | 2.40 | 2.53 |
0.20 | 0.24 | 126 | 3.20 | 3.40 |
0.14 | 0.15 | 127 | 4.10 | 4.35 |
Put in place a Bear Spread using puts.
(a) List the options you need to trade, the position to take in each option, and the cash-flow (+ when you sell, - when you buy)
(b) What is the break-even point of this strategy?
(c) Assume those are European options. S(0) = $122.90, the risk-free rate is 0.25% in continuous-time, and the maturity of those options is (84/365) year. For each option traded, verify whether the put-call parity is respected.
(Hint: manipulate the put-call parity formula such that the call and the put are on one side of the equal side, while the stock and the strike are on the other side. Be careful to use the right quote: bid or ask)
(d) What are the maximum and minimum payoffs (not including the premium)?
(e) What are the maximum and minimum profits (loss) ?
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