1) An investor is considering buying 700 shares of Vodafone company at 43 EGP per share. Advisors predict that the stock price may increase to 52 EGP per share in the coming 3 months. To hedge this, the investor could purchase a 90-day call option at a strike price of 41 EGP for 7,500 EGP 3 a) What profit/loss would the investor realize if the stock price increased to 50 EGP per share? b) At what stock price would the investor break even? c) The standard option contract is for: 1 share of stock, 50 shares of stock, 100 shares of stocks, or 1000 shares of stock 2) An investor has 80,000 EGP which will be invested in a long-put option contract, the premium per share is 20 EGP. If the market price of the stock on the exercise date is 50 EGP, and the strike price is 56 EGP 2 a) What is the value of the contract on the exercise date and determine whether it's in the money, out of the money, or at the money? And why? b) What is the rate of return? 3) If you are sure that the price of stock X would increase dramatically within 4 months. Which type of derivative contract would you invest in? and why? 4) A stock that has a current price of 50 EGP, and a strike price of 47 EGP has an associated put option priced at 4 EGP per contract What is the intrinsic value pf this put, and what is the time value? 5) The writer of a call contract expects the stock price to increase, while the writer of a put option expects the stock price to decrease. Do you agree with this statement? Why? Why not? 6) An investor buys 1 PepsiCo Feb 35 Call for 3.50 EGP. and 1 PepsiCo Feb 35 Put for 0.50 EGP when the market price of PepsiCo is at 34.75 EGP. PepsiCo stock moves to 29 EGP and stays there. Just prior to expiration, the positions are closed at intrinsic value. What is the name of this strategy, and What is the gain loss of the investor? 7) The strike price of a short strangle option contact is 50 EGP for the call, and 40 EGP for the put. The premium per share is 4 EGP. If the market price is 60 EGP and the investor has 100 contracts a) What will be the total net payoff or loss? b) What is the breakeven point of the short strangle option? 1) An investor is considering buying 700 shares of Vodafone company at 43 EGP Advisors predict that the stock price may increase to 52 EGP per share in the coming 3 months. To hedge this, the investor could purchase a 90-day call option at a strike price of 41 EGP for 7,500 EGP 3 a) What profitloss would the investor realize if the stock price increased to 50 EGP per share? b) Al what stock price would the investor break even? c) The standard option contract is for 1 share of stock, 50 shares of stock, 100 shares of stocks, or 1000 shares of stock 2) An investor has 80,000 EGP which will be invested in a long-put option contract the premium per share is 20 EGP. If the market price of the stock on the exercise date is 50 EGP, and the strike price is 56 EGP 2 a) What is the value of the contract on the exercise date and determine whether it's in the money, out of the money, or at the money? And why? b) What is the rate of return? 3) Wf you are sure that the price of stock X would increase dramatically within 4 months. Which type of derivative contract would you invest in? and why? 4) A stock that has a current price of 50 EGP, and a strike price of 47 EGP has an associated put option priced at 4 EGP per contract What is the intrinsic value pf this put, and what is the time value? 5) The writer of a call contract expects the stock price to increase, while the writer of a put option expects the stock price to decrease. Do you agree with this statement? Why? Why not? 6) An investor buys 1 PepsiCo Feb 35 Call for 3.50 EGP and 1 PepsiCo Feb 35 Put for 0.50 EGP when the market price of PepsiCo is at 34.75 EGP PepsiCo stock moves to 29 EGP and stays there. Just prior to expiration, the positions are closed at intrinsic value What is the name of this strategy, and What is the gainloss of the investor? 7) The strike price of a short strangle option contact is 50 EGP for the call, and 40 EGP for the put. The premium per share is 4 EGP. If the market price is 60 EGP and the investor has 100 contracts a) What will be the total net payoff or loss? b) What is the breakeven point of the short strangle option
