The TSLA stock is trading at $391 per share on September 24,2020 . The premiums (prices) of options written on a single TSLA stock with expiration date November 20, 2020 as reported in Yahoo Finance are as follows: Suppose that an investor's expectation on September 24, 2020 about where the TSLA share price will be on November 20, 2020 is given by the following probability distribution: a) What is the investor's expected return on the TSLA stock from September 24, 2020 to November 20, 2020? (Throughout the question, assume that we consider option exercise at maturity.) a) What is the investor's expected return on the TSLA stock from September 24, 2020 to November 20, 2020? (Throughout the question, assume that we consider option exercise at maturity.) b) Which of the listed options are ITM and which are OTM on September 24, 2020? Provide a reasoning why Call prices decrease as the Strike increases while Put prices increase as the Strike increases. c) Consider the Put option with Strike 320 . What is the payoff and the realized rates of return on that option for each of the six scenarios? How about the Call option with Strike 320? How does the Call option's return in the two extreme scenarios with prices 570 and 290 compare to the TSLA stock itself? d) What is the investor's expected rate of return on the Call and the Put with Strikes 320 ? What explains the difference between the Call's and Put's expected returns? The TSLA stock is trading at $391 per share on September 24,2020 . The premiums (prices) of options written on a single TSLA stock with expiration date November 20, 2020 as reported in Yahoo Finance are as follows: Suppose that an investor's expectation on September 24, 2020 about where the TSLA share price will be on November 20, 2020 is given by the following probability distribution: a) What is the investor's expected return on the TSLA stock from September 24, 2020 to November 20, 2020? (Throughout the question, assume that we consider option exercise at maturity.) a) What is the investor's expected return on the TSLA stock from September 24, 2020 to November 20, 2020? (Throughout the question, assume that we consider option exercise at maturity.) b) Which of the listed options are ITM and which are OTM on September 24, 2020? Provide a reasoning why Call prices decrease as the Strike increases while Put prices increase as the Strike increases. c) Consider the Put option with Strike 320 . What is the payoff and the realized rates of return on that option for each of the six scenarios? How about the Call option with Strike 320? How does the Call option's return in the two extreme scenarios with prices 570 and 290 compare to the TSLA stock itself? d) What is the investor's expected rate of return on the Call and the Put with Strikes 320 ? What explains the difference between the Call's and Put's expected returns
