Question
The point of purchasing a European option is to limit the risk of a decrease in the pershare price of the stock. Suppose you purchased
The point of purchasing a European option is to limit the risk of a decrease in the pershare price of the stock. Suppose you purchased 200 shares of the stock at $28 per share and 75 six-month European put options with an exercise price of $26. Each put option costs $1.
3. Build a (spreadsheet) model to show the value of the portfolio with options and without options. ( (Follow the above to create the parameters and the formulas for Model)
4. Use data tables to shows the value of the portfolio with options and without options for a share price in six months between $15 and $35 per share in increments of $1.00.
\begin{tabular}{|r|r|r|} \hline 3 & \multicolumn{1}{|c|}{ A } & \multicolumn{1}{|c|}{ Barameters } \\ \hline 4 & Costs of Put Option & \\ \hline 5 & Exercise Price & $1.00 \\ \hline 6 & Horizon (months) & $26.00 \\ \hline 7 & Price per share & 6 \\ \hline 8 & Price- End of Horizon & $28.00 \\ \hline 9 & & $23.00 \\ \hline 10 & & \\ \hline 11 & Number of Shares Purchased & \\ \hline 12 & Number of Puts Purcased \\ \hline 13 & & 700 \\ \hline 14 & Vaue of the Option \\ \hline 15 & & \\ \hline 16 & Portfolio Value with Options \\ \hline 17 & Cost of the Portfolio with Options \\ \hline 18 & Profit with Options \\ \hline 19 & \\ \hline 20 & Portfolio Value without Options \\ \hline 21 & Cost of the Portfolio without Options \\ \hline 22 & Profit without Options \\ \hline \end{tabular}Step by Step Solution
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