Hi I need Q 5 to Q 8 ASAP please I need it within the next 12
Fantastic news! We've Found the answer you've been seeking!
Question:
Hi I need Q 5 to Q 8 ASAP please I need it within the next 12 hours.
Prof. PIRIM Fall 2016 Advanced Investment (BusFin 4229 ) Problem Set 2: Call and Put Option Contract This problem set is due at the beginning of class on Thursday, September 15th, 2016. Hand in only one solution per group. Question 1 (6 Points) Explain and show on a diagram the profit at maturity from the following combinations of positions. Please show the profit from each option or stock and the profit from the combined position on ONE graph. You should have one graph each for a, b, and c. Please label carefully all turning points and profit levels. To find the future value, use continuous compounding, where r, risk-free interest is 1% annually and time to maturity, T is 0.0417 year. All options expire at the same time, at T=0.0417 year. You can use ranges of $65, 66, 67, 68, 69...........$82 for DELL stock price at maturity. DELL Stock Price Strike Expiration Call Premium Put premium 71.76 70 Sep 2.25 0.45 71.76 75 Sep 0.10 3.40 71.76 80 Sep 0.05 8.30 a) Buy one 70 Sep call and buy one 80 Sep Put b) Buy one 70 Sep put, buy one 80 Sep put, and short a round lot (100 shares) of the underlying stock c) Buy one 75 Sep call and sell one 75 Sep put option. 1 Question 2 (2 Points) A trader buys a European call option and sells a European put option. The options have the same underlying asset, strike price, and maturity. Describe the trader's position. Under what circumstances does the price of the call equal the price of the put? Question 3 (2 Points) Suppose that call options on a stock with strike prices of $35 and $40 cost $3.40 and $1.40, respectively and expiration is in 4 months. How can the options be used to create a) a bull spread and b) a bear spread? Construct a table that shows the profit and payoff for both spreads. Draw the bull and bread spread profit diagram. (Ignore time value of money). Question 4 (2 Points) A call with a strike price of $60 costs $6. A put with the same strike price and expiration date costs $4. Construct a table that shows the profit from a straddle. For what range of stock prices would the straddle lead to a loss? (Ignore time value of money). The following option prices were observed for a stock for July 6 of a particular year. Use this information in questions 5 through 8. Ignore dividends on the stock. The stock is priced at 165.13. The expirations are July 17, August 21, and October 16 and the continuously compounded interest rates are 0.0503, 0.0535, and 0.0571, respectively. The options are European. In following problems, determine the profits for possible stock prices of 150, 155, 160, 165, 170, 175, and 180. Answer any other questions as requested. 2 Calls Puts Strike Jul Aug Oct Jul Aug Oct 165 2.7 5.25 8.1 2.4 4.75 6.75 170 0.8 3.25 6.0 5.75 7.5 9.00 Question 5 (2 Points): Buy one August 165 call contract. Hold it until the option expires. Determine the profits and graph the results. Then identify the breakeven stock price at expiration. What is the maximum possible loss on this transaction? Question 6 (2 Points) Buy October 165 put contract. Hold it until the option expires. Determine the profits and graph the results. Identify the breakeven stock price at expiration. What are the maximum gain and loss on this transaction? Question 7 (2 Points) Buy 100 shares of stock and write one October 170 call contract. Hold the position until expiration. Determine the profits and graph the results. Identify the breakeven stock price at expiration, the maximum profits, and the maximum loss. Question 8 (2 points) Buy 100 shares of stock and buy one August 165 put contract. Hold the position until expiration. Determine the profits and graph the results. Determine the breakeven stock price at expiration, the maximum profit, and the maximum loss. 3
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date: