These are 3 questions from the topic of Introduction of Derivatives and Risk Management.

Really need help on these questions.

Can anyone help on these questions and with the calculation workings. Thanks so much.

Topic: Introduction to Derivatives and Risk Management Question 1 (from when wool futures contracts existed - ceased trading 2014) Assume that it is currently October 2009 and you trade futures contracts at the last price. A wool grower anticipates a 22,000 kg clip in December. The grower decides to hedge the entire crop using futures. In December the grower shears 24,000 kg of wool, the auction price for wool is 800 cents per kg and December futures contracts are trading for 805 cents per kg. a. Calculate the overall value of the clip including the profit or loss from futures trading. b. Calculate the overall value of the clip in December if drought conditions limit the grower's clip to only 1,000kg, the auction price for wool is 1,100 cents per kg and the December futures contracts price is 1,100 cents per kg. Question 2 The following information was obtained from asx.com.au on 11/10/12. BHP - Share Price = 33.23 BHPCR9 - Premium = 0.58 per share Description: $34.00 CALL OPTION EXPIRING 29-Nov-2012 Underlying asset: BHP BILLITON LIMITED Expiry: 29 Nov 2012 Exercise Price: 34.000 Exercise style: American Open Interest: 9,694 Contract size: 100 securities BHPCU9 - Premium = 0.75 per share Description: $33.00 PUT OPTION EXPIRING 29-Nov-2012 Underlying asset: BHP BILLITON LIMITED Expiry: 29 Nov 2012 Exercise Price: 33.000 Exercise style: American Open Interest: 6,646 Contract size: 100 securities a. Draw the call and put payoff diagrams for the writers and the buyers From this information determine the following profit and loses under the hypothesised shares price at 29 November 2012. Your calculations should use the contract size specified above. b. You buy the call. The share price goes to $38.00. c. You write the put. The share price goes to $38.00 d. You write the call and buy the share. The share price goes to $42.15 e. You write the call, you write the put and you buy the share. The share price goes to 28.50. f. If the premium on the call with an exercise price of $31.00 was 1.00, would there be an arbitrage opportunity based on the current BHP price? That is, could you develop a trading strategy that would yield riskless profit? Also, how would your trading strategy affect the pricing of the option and the stock, and your ability to continue to exploit any perceived mispricing? Question 3 You have devised a trading strategy as follows. You write one put options with an exercise price of $38. The premium is $3.00. You write a call option on the same shares with an exercise price $40. The premium is $5.00. You also buy a share for $35. Assume that, at expiry, the options are exercised if they are in-the-money and lapse if out-of-the-money. Also, any shareholdings are sold at the expiry date. (a) What is the net profit/loss from the trading strategy if the share price is $46 at the expiry date? (b) What is the net profit/loss from the trading strategy if the share price is $30 at the expiry date? (c) Assume you bought the above options and share. What would the net profit/loss from this trading strategy be if the price goes to $43 at the expiry date? (d) Following from (c), what would be the net profit/loss if the share price drops to $32 at the expiry date