A trader creates a bear spread by selling a six-month put option with a $25 strike price for $1.51 and buying a six-month put with a $29 stir price for $4.75. At what stock price will the strategy break even ?
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A trader creates a bear spread by selling a six-month put option with a $25 strike price for $1.51 and buying a six-month put with a $29 stir price for $4.75. At what stock price will the strategy break even ?
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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 = 0.49Put–Call Parity The current price of a stock is $33, and the annual risk-free rate is 6%. A call option with a strike price of $32 and with 1 year until expiration has a current value of $6.56. What is the value of a put option written on the stock with the same exercise price and expiration date as the call option?A trader creates a bear spread by selling a six-month put option with a $25 strike price for $2.15 and buying a six-month put option with a $29 strike price for $4.75. What is the initial investment?
- A trader creates a bear spread by selling a six-month put option with a $25 strike price for $2.15 and buying a six-month put option with a $29 strike price for $4.75. What is the total payoff when the stock price in six months is (a) $23A trader creates a bear spread by selling a six-month put option with a $25 strike price for $2.15 and buying a six-month put option with a $29 strike price for $4.75. What is the total payoff when the stock price in six months is (b) $28A butterfly spread is a position in three options on the same underlying stock with different strikes. An investor buys one call with a strike K1 = 22, sells two calls with a strike K2 = 24 and buys one call with a strike K3 = 26. What is the payoff of the butterfly spread, if the stock price equals $26 at maturity?
- A trader creates a long butterfly spread from call options with strike prices $60, $82, and $92 by trading a total of 400 options. The options are worth $8, $14, and $23 respectively. What is the maximum net gain (after the cost of the options is taken into account)?An investor purchases a call for CL0 = $3.00 with a strike of X = $40 and sells a call for CH0 = $1.00 with a strike price of $50. Compute the profit of a bull call spread strategy when the price of the stock is at $45.A one-year call option on a stock with strike price of $90 costs $6 and a one-year put option on the same stock with strike price of $90 costs $7. Suppose that a trader buys one call option and one put option. a. What is the breakeven stock price, above which the trader makes a profit? b. What is the breakeven stock price, below which the trader makes a profit?
- Suppose that you sell for 8 dollars a call option with a strike price of 45 dollars, and you sell for 13 dollars each two put options with a strike price of 55 dollars. What is the minimum stock price at the exercise date that will result in you breaking even? Don't use Excel and chatgptA stock price is $30. An investor buys one call option contract on the stock with a strike price of $28 and sells a call option contract on the stock with a strike price of $27. The market prices of the options are $2 and $1.7, respectively. The options have the same maturity date. Describe the investor’s position and the possible gain/loss he will get (taking into account the initial investment). Make a graph of your gain/loss.Stock Z is currently trading at $27 per share. Its three-month call option has a strike price of $33 per share. Z’s three-month put option has a strike price of $25 per share. Which of the following is CORRECT? Investor should not exercise the call option because it is out of the money Investor should exercise the put option because it is in the money Investor should exercise the call option because it is in the money Investor should let both options expire because they are at the money
