Price Matrix: XYZ: Bid-$50.00 Ask-$50.05 Last-$50.00, numbers in () are days to Expiration. Calls XYZ Puts April (34) July (125) April (34) July (125) A Strike Bid/Ask A A Bid/Ask Bid/Ask Bid/Ask 15/15.25 99 15/16.00 98 35 0.05/0.08 - 1 0.10/0.15 -2 10/10.35 99 11/11.50 91 40 0.05/0.10 -1 0.30/0.55 -9 5.40/5.65 86 7.40/7.65 77 45 0.25/0.40 -14 1.40/1.65 -23 2.40/2.65 55 4.50/4.75 59 50 1.75/2.00 -45 3.40/3.65 -41 0.55/0.65 22 2.45/2.70 40 55 5.15/5.40 -78 6.25/6.65 -60 0.05/0.15 5 1.20/1.45 20 60 9.90/10.30-95 10/10.60 -80 In preparation for the questions below workout, Ratio Synthetic Put Strategy and Ratio Insurance Put Strategy in Chapters 7&8. 1. Set up your strategy (figure out your initial delta of your portfolio, maximum cost and the upper/lower BE prices at expiration) 2. Once the price of the stock changes, need to figure out the new delta of your portfolio, your profit/loss and delta at expiration Q19. Refer to matrix above to answer this question. a. Construct July at-the-money ratio (Use 100 shares) synthetic put strategy with data from the matrix above. Show your calculations of initial cost and initial delta. Graph the strategy the shape of the initial strategy. Your calculations and graph must clearly, the initial cost, initial delta and maximum risk. Is this bullish or bearish strategy? Can we estimate the daily cost of the strategy? Chapter 8 b. In a new figure, graph the above strategy (July at-the-money ratio synthetic put) at Expiration. Your calculations and the graph must clearly show breakeven point(s), the value of the deltas and profit/loss at Expiration for three possible stock price outcomes ($40, $50, $60). Page 4 of 6 Q 20: a. Construct April ATM Ratio insurance Put Strategy. Show your calculations of initial cost and initial delta. Graph the strategy the shape of the initial strategy. Your calculations and graph must clearly show the initial cost, initial delta and maximum risk. Is this bullish or bearish strategy? Can we estimate the daily cost of the strategy? Chapter 8 b. In a new figure graph the above strategy (April at-the-money ratio insurance put) at Expiration. Your calculations and graph must clearly show breakeven point(s), the value of the deltas and profit/loss at Expiration for three possible stock price outcomes ($40, $50, $60). Price Matrix: XYZ: Bid-$50.00 Ask-$50.05 Last-$50.00, numbers in () are days to Expiration. Calls XYZ Puts April (34) July (125) April (34) July (125) A Strike Bid/Ask A A Bid/Ask Bid/Ask Bid/Ask 15/15.25 99 15/16.00 98 35 0.05/0.08 - 1 0.10/0.15 -2 10/10.35 99 11/11.50 91 40 0.05/0.10 -1 0.30/0.55 -9 5.40/5.65 86 7.40/7.65 77 45 0.25/0.40 -14 1.40/1.65 -23 2.40/2.65 55 4.50/4.75 59 50 1.75/2.00 -45 3.40/3.65 -41 0.55/0.65 22 2.45/2.70 40 55 5.15/5.40 -78 6.25/6.65 -60 0.05/0.15 5 1.20/1.45 20 60 9.90/10.30-95 10/10.60 -80 In preparation for the questions below workout, Ratio Synthetic Put Strategy and Ratio Insurance Put Strategy in Chapters 7&8. 1. Set up your strategy (figure out your initial delta of your portfolio, maximum cost and the upper/lower BE prices at expiration) 2. Once the price of the stock changes, need to figure out the new delta of your portfolio, your profit/loss and delta at expiration Q19. Refer to matrix above to answer this question. a. Construct July at-the-money ratio (Use 100 shares) synthetic put strategy with data from the matrix above. Show your calculations of initial cost and initial delta. Graph the strategy the shape of the initial strategy. Your calculations and graph must clearly, the initial cost, initial delta and maximum risk. Is this bullish or bearish strategy? Can we estimate the daily cost of the strategy? Chapter 8 b. In a new figure, graph the above strategy (July at-the-money ratio synthetic put) at Expiration. Your calculations and the graph must clearly show breakeven point(s), the value of the deltas and profit/loss at Expiration for three possible stock price outcomes ($40, $50, $60). Page 4 of 6 Q 20: a. Construct April ATM Ratio insurance Put Strategy. Show your calculations of initial cost and initial delta. Graph the strategy the shape of the initial strategy. Your calculations and graph must clearly show the initial cost, initial delta and maximum risk. Is this bullish or bearish strategy? Can we estimate the daily cost of the strategy? Chapter 8 b. In a new figure graph the above strategy (April at-the-money ratio insurance put) at Expiration. Your calculations and graph must clearly show breakeven point(s), the value of the deltas and profit/loss at Expiration for three possible stock price outcomes ($40, $50, $60)
