FIN 550- Module 8 - Call Option Price

Your Question : Please introduction and correct and incorrect option explain!

If the stock price increases, the price of a put option on that stock ________ and that of a call option _________.     decreases, increases     decreases, decreases     increases, decreases     increases, increases

The Black-Scholes option pricing theorem claims that which of the following factors influence options prices in a predictable way: a) The relation between the current price and the strike price b) How much time there is from now until the expiry date c) Whether the underlying asset is a corporate share or a raw material d) Whether the option is presently in the money or not e) Only (a) and (b)

The maximum loss a buyer of a stock call option can suffer is equal to   A. the striking price minus the stock price. B. the stock price minus the value of the call. C. the call premium. D. the stock price.

Which of the following statements is true about call options?   A.The holder of the option profits when the price of the underlying asset increases.   B.It gives to the buyer of the option the right to sell a financial instrument within a specific time period, at a specified price.   C.The holder of the option will exercise the option only if the price of the underlying asset is smaller than the strike price.   D.The holder of the option receives a premium for writing the option.

If an investor places a _________ order, the stock will be sold if its price falls to the stipulated level. If an investor places a __________ order, the stock will be bought if its price rises above the stipulated level.    Group of answer choices   stop-loss; stop-buy market; limit stop-buy; stop-loss limit; market

Tick all those statements on options that are correct (and don't tick those statements that are incorrect). B a. The Black-Scholes formula is based on the assumption that the share price follows a geometric Brownian motion. b. If interest is compounded continuously then the put-call parity formula is P+ S(0) = C + Ker where T is the expiry time. An American put option should never be exercised before the expiry time. d. In general the equation S(T) +(K-S(T)) = (S(T)-K)+ +K is valid. e. The put-call parity formula necessarily requires the assumption that the share price follows a geometric Brownain motion. C.

Does at the money ,in the money, out of the money is used to tell about position of strike price in the market when buy or sell the option only (judge by comparing srike price and the spot price in market at that moment,Is it used to tell status of the option on expiration date by comparing srike price and the market price at expiration date or not, if not please explain to me by using some example to explain it.

The premium on a put option is primarily a function of the difference in spot price S relative to the strike price X, the time until maturity T, and the volatility of the currency o. P = f(S-X, T, o) For each characteristic of a put option, use the table to indicate whether that would lead to a higher put option premium or a lower put option premium (all else equal). Characteristic A lower spot price relative to the strike price A shorter time before expiration A higher level of volatility for the currency Higher Put Option Premium Lower Put Option Premium When using a put option to hedge receivables in an international currency, a U.S. based MNC can lock in the receive. minimum maximum amount of dollars it will

What is the value of a call option or a put option if the stock price is zero? What if the stock price is extremely high (relative to the strike price)?

Analyze the value of a call option if the stock price is zero? What if the stock price is extremely high (relative to the strike price)?

Who correctly identifies the effect of increases in volatility of the underlying asset on option prices? Johnny Kyle Linda Johnny Mike [↓ = decrease, t = increase] O Kyle O Linda Call price ↑ ↑ ↓ ↓ Mike Put Price ↑ ↓ ↓ ↑

Select all that are true with respect to option valuation: Group of answer choices   The holder of a call option has rights to the dividend on the underlying stock. The holder of a put option has rights to the dividend on the underlying stock. A call option on a dividend paying stock would be worth less than a call option on that same stock if it were non-dividend paying (i.e., all else is equal other than the dividend). A call option on a dividend paying stock would be worth more than a call option on that same stock if it were non-dividend paying (i.e., all else is equal other than the dividend).

What impact does each of the followingparameters have on the value of a call option?(1) Current stock price

If a stock's price is above the strike price of a call option written on the stock, then the exercise value is equal to the stock price minus the strike price. If the stock price is below the strike price, the exercise value of the call option is zero.   True or False?

Why do call options with exercise prices greater than the price of the underlying stock sell for positive prices?

Who correctly identifies the effect of increases in volatility of the underlying asset on option prices? Johnny Kyle Linda Johnny Mike [↓ = decrease, ↑ = increase] O Kyle O Linda Call price ↑ ↑ ↓ ↓ Mike Put Price ↑ ↓ ↓ ↑

Let C be the price of a call option that enables its holder to buy one share of a stock at an exercise price K at time t; also, let P be the price of a European put option that enables its holder to sale one share or the stock for the amount K at time t.  Let S be the price of the stock at time 0.  Then, assuming that interest is continuously discounted at a nominal rate r, either S+P-C=Ke-rt or there is an arbitrage opportunity.  Question:  How do I verify that the strategy of selling one share of stock, selling one put option, and buying one call option always results in a positive win if S+P-C>Ke-rt ?

The premium on a call option is primarily a function of the difference in spot price S relative to the strike price X, the length of time until expiration T, and the volatility of the currency o. C = f(S-X, T, o) For each characteristic of a call option, use the table to indicate whether that would lead to a higher call option premium or a low call option premium (all else equal). Characteristic A lower spot price relative to the strike price A shorter time before expiration A higher level of volatility for the currency Higher Call Option Premium O Lower Call Option Premium When using a call option to hedge payables in an international currency, a U.S. based MNC can lock in the to obtain the needed foreign currency. maximum minimum amount of dollars needed

Select all that are true with respect to the Black Scholes Option Pricing Model (OPM) in practice): Group of answer choices   BSOPM assumes that the volatility of the underlying stock returns is constant over time. BSOPM assumes that the underlying stock can be traded continuously. BSOPM assumes that there are no transaction costs. There is only one input to the BSOPM that is not observable at the time you are valuing a stock option, and that input is volatility. Implied volatility is estimated by calculating the daily volatility of the underlying stock’s return that occurred over the prior six months.

3. Suppose that a June put option to sell a share for $60 costs $4 and is held until June. (a) short position) make a profit? Under what circumstances will the seller of the option (i.e., the party with a (b) Under what circumstances will the option be exercised? (c) depends on the stock price at the maturity of the option. Draw a diagram showing how the profit from a short position in the option

Please choose on the options and please explain