23. Boricua stock is currently trading at a market price (S) of $95. have an options strategy in place. You are long a put option on 1 share with a strike price (X) of $92 and a long call option with a strike price (X) of $97. The put option's premium was $5. The call option's premium was $6. How would you describe this strategy? * Bullish Bearish Neutral Directional

23. Boricua stock is currently trading at a market price (S) of $95. have an options strategy in place. You are long a put option on 1 share with a strike price (X) of $92 and a long call option with a strike price (X) of $97. The put option's premium was $5. The call option's premium was $6. How would you describe this strategy? * Bullish Bearish Neutral Directional

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A stock is trading at $46.96 per share, and the 47.5 option is quoted at $5.60 bid and $6.00 ask. The next day the stock is up $2.87 on strong earnings. You see that the option had a theta of -.02 and a delta of .56. Based only on this information, how much extrinsic value should you expect the option's ask price to have? (Answer in dollars per share of option, i.e., 2.87 not 287).
A stock priced at $50 has two possible outcomes, either increases to $60 or decreases to $42. If the stock goes up, the payoff of the stock's call option = S5. But, if the stock price declines to $42, the calls will expire worthless. Given these two possible outcomes, what is the Hedge Ratio of the Call option? Round your answer to two decimals. The listed correct answer was 0.28. I could not find a way to get this.
speculator may write a put option on stock with an exercise price of $15 and earn a $3 premium only if he thought A-the stock price would rise above $18 or fall below $12. B-the stock price would stay above $15. C-the stock price would stay below $12. D-the stock price would fall below $18.
An investor is bearish on a particular stock and decided to buy a put with a strike price of $25. Ignoring commissions, if the option was purchased for a price of $.85, what is the break-even point for the investor? $26.15 $25 $25.87 $27.86 $24.15
Suppose that call options on ExxonMobil stock with time to expiration 6 months and strike price $87 are selling at an implied volatility of 27%. ExxonMobil stock price is $87 per share, and the risk-free rate is 6%. Required: If you believe the true volatility of the stock is 31%, would you want to buy or sell call options? Now you want to hedge your option position against changes in the stock price. How many shares of stock will you hold for each option contract purchased or sold?
A stock currently trades at $100. Consider a put and a call option written on this stock with strike price $105. Which of the following statements is most accurate? A.The call option is in-the-money and the put option is out-of-the-money B.The call option is out-of-the-money and the put option is in-the-money C.Both options are in-the-money D.Cannot determine without further information
Assume a stock is selling for GH¢48.50 with options available at 40, 50, and 60 strike prices.The 50 call option price is at 2.75.a. What is the intrinsic value of the 50 call?b. Is the 50 call in the money?c. Are the 40 and 60 call options in the money?
a) What is the price of a $35 strike call? Assume S = $38.50, σ = 0.25, r = 0.06, the stock pays no dividend and the option expires in 45 days.b) What is the price of a $60 strike put? Assume S = $63.75, σ = 0.20, r = 0.055, the stock pays no dividend and the option expires in 50 days?c) What is the price of a $25 strike call? Assume S = $23.50, σ = 0.24, r = 0.055, the stock pays a 2.5% continuous dividend and the option expires in 45 days
a) what is the price of a $35 strike call? Assume S=$38.50, σ =0.25, r=0.06, the stock pays no dividend and the option expires in 45 days. b)what is the price of a $60 strike put? Assume S=$63.75, σ =0.20, r=0.055, the stock pays no dividend and the option expires in 50 days? c) What is the price of a $25 strike call? Assume S=$23.50, σ=0.24, r=0.055, the stock pays a 2.5% continuous dividend and the option expires in 45 days? d) what is the price of a $30 strike put? Assume S=$ 28.50, σ=0.32, r=0.04, the stock pays a 1.0% continuous dividend and the option expires in 110 days? e) what is the delta on a $20 strike call? Assume S=$22.00, σ =0.30, r=0.05, the stock pays a 1.0% continuous dividend and the option expires in 80days
Suppose Amazon’s stock is trading for $530 per share, and Amazon pays no dividends. What is the maximum possible price of a call option on Amazon? What is the maximum possible price of a put option on Amazon with a strike price of$585? iii. What is the minimum possible value of a call option on Amazon stock with a strike price of $505? iv. What is the minimum possible value of an American put option on Amazon stock with a strike price of $600?
For each of the 100-share options shown in the following table below; use the underlying stock price at expiration and other information to determine the amount of profit or loss an investor would have had. Option Type of option Cost of option Strike price per share Underlying stock price per share at expiration A Call $214 $48 $53 B Call $372 $45 $48 C Put $537 $63 $54 D Put $297 $32 $36 E Call $495 $27 $24 The profit (loss) experienced on option A is $ ? (Round to the nearest dollar. Enter a negative number for loss.)
7. The cuurent market price of a share of BCE storck is $50 . If a call option on this stock has a strike price of $45 the call: a. is out of the money b. is in the money c. sells for a higher price than if the market price of BCE stock is $0 d. a and c. e. b and c

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