A call and put options on ABC stock are.19 available with exercise prices of $60, $45, $40 and $78. Among the different exercise prices, the exercise price and the exercise price will have put option with the call option with the * the greatest value
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- In 1973, Fischer Black and Myron Scholes developed the Black-Scholes option pricing model (OPM). (1) What assumptions underlie the OPM? (2) Write out the three equations that constitute the model. (3) According to the OPM, what is the value of a call option with the following characteristics? Stock price = 27.00 Strike price = 25.00 Time to expiration = 6 months = 0.5 years Risk-free rate = 6.0% Stock return standard deviation = 0.49A call and put options on ABC stock are available with exercise prices of $60, $45, $40 and $78. Among the different exercise prices, the put option with the exercise price and the call option with the exercise price will have the greatest value.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?
- You bought (that is, you are “long”) both a put option and a call option on Strockfoot stock with the same expiration date. The exercise price of the call option is $40 and the exercise price of the put option is $30. Carefully graph the payoff of the combination of options at expiration.parts c, d, e Suppose an investor is considering a multi option strategy on a stock with a currentprice of $100. The following strategy is called a strangle. The investor purchases a call optionwith a strike price of $110 for a premium of $5 and purchases a put option with a strike priceof $90 for a premium of $3.a) Draw a payout diagram for the strangle option strategy at expiration.b) Determine the breakeven points for the strangle option strategy.c) Suppose the stock price at expiration is $120. What is the profit for the strangle optionstrategy?d) Suppose the stock price at expiration is $85. What is the profit for the strangle optionstrategy?e) What is the investor speculating on with her option strategy?Consider two put options on different stocks. The table below reports the relevant information for both options: Put optionTime to maturityCurrent price of underlying stockStrike priceVolatility ( )X1 year$27$1830%Y1 year$25$2030%All else equal, which put option has a lower premium? A.Put option Y B.Put option X
- A. An option is trading at $5.03. If it has a delta of -.56, what would the price of the option be if the underlying increases by $.75? What would the price of the option be if the underlying decreases by $.55? B. What type of option is this and how? C. With a delta of -.56, is this option ITM, ATM or OTM and how?You use the Black-Scholes-Merton model for a put option on a stock. You calculate N(d1) = 0.60 and N(d2) = 0.56. a) What is the delta of the put option? Solution for A = -0.40 b) You short 100 put options. How would you hedge your delta exposure using the underlying stock? How many shares would you need to buy or sell?A call option with X = $55 on a stock priced at S = $60 is sells for $12. Using a volatility estimate of σ = 0.35, you find that N(d1) = 0.7163 and N(d2) = 0.6543. The risk-free interest rate is zero. Is the implied volatility based on the option price more or less than 0.35?
- You use the Black-Scholes-Merton model for a put option on a stock. You calculate N(d1) = 0.60 and N(d2) = 0.56. a) What is the delta of the put option? b) You short 100 put options. How would you hedge your delta exposure using the underlying stock? How many shares would you need to buy or sell?Consider Triple Play’s call option with a $25 strike price. The following table contains historical values for this option at different stock prices: Stock Price Call Option Price $25 $ 3.00 30 7.50 35 12.00 40 16.50 45 21.00 50 25.50 Create a table which shows (1) stock price, (2) strike price, (3) exercise value, (4) option price, and (5) the time value.Suppose that put options on a stock with strike prices $18 and $20 cost $2 and $3.50, respectively. How can the options be used to create a bull spread? Construct atable that shows the profit and payoff for the spread.
