Question
Two British pound () put options are available with exercise prices of $1.64 and $1.68. The premiums associated with these options are $0.04 and $0.06
Two British pound () put options are available with exercise prices of $1.64 and $1.68. The premiums associated with these options are $0.04 and $0.06 per unit, respectively. One option contract represents 31,250.
Value of British Pound at Option Expiration | ||||
$1.58 | $1.64 | $1.68 | $1.74 | |
Put @ $1.64 | $ | $ | $ | $ |
Put @ $1.68 | $ | $ | $ | $ |
Net | $ | $ | $ | $ |
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Describe how a bull spread can be constructed using these put options. What is the difference between using put options versus call options to construct a bull spread?
A bull spread can be constructed with buying the ($1.64, or $1.68) put option and writing the ($1.64, $1.68) put option. The difference between using call and put options to construct a bull spread is that using put options results in a (credit, debit) spread.
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Complete the worksheet for the bull spread. Use a minus sign to enter loss values, if any. If the answer is zero, enter "0". Round your answers to the nearest cent.
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At option expiration, the spot rate of the pound is $1.64. What is the bull spreaders total gain or loss? Use a minus sign to enter loss values, if any. Round your answer to the nearest dollar.
$
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At option expiration, the spot rate of the pound is $1.61. What is the bear spreaders total gain or loss? Use a minus sign to enter loss values, if any. Round your answer to the nearest dollar.
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