A trader has established a short straddle on shares of ABC ltd at sh 5 each for a put option and a call option and a strike price of sh 50. Required: Compute the profits on expiration if the shares are selling at sh 20 sh 40 sh50 sh60 sh 70
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A trader has established a short straddle on shares of ABC ltd at sh 5 each for a put option and a call option and a strike price of sh 50.
Required:
Compute the profits on expiration if the shares are selling at
- sh 20
- sh 40
- sh50
- sh60
- sh 70
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- An investor has established a long straddle on shares of ABC ltd at sh 5 each for a put option and a call option and a strike price of sh 50. Required: Compute the profits on expiration if the shares are selling at sh 20 sh 40 sh50 sh60 sh 70An investor has established a long straddle on shares of ABC ltd at sh 5 each for a put option and a call option and a strike price of sh 50. If the shares are selling at (i) sh 20, (ii) sh 40, (iii) sh 50, (iv) sh 60 and (v) sh 70 Required: Draw two profit and loss tablesAn investor has established a long straddle on shares of ABC ltd at sh 5 each for a put option and a call option and a strike price of sh 50. If the shares are selling at (i) sh 20, (ii) sh 40, (iii) sh 50, (iv) sh 60 and (v) sh 70 Required: Draw graphs of Long Call, Long Put, Long Straddle, short call, short put and short straddle.
- 4. Shares of ABC Ltd are currently traded at Rs .1770. A call option with a strike price of 1750 and expiring in 90 days is traded at Rs.60 while a put with same strike price and maturity is traded at Rs .25. Show the payoff profile of a long straddle position using these options assuming that the share price on expiry date falls in the range of 1550 to 1950 at intervals of Rs.50. Also show the payoff diagram.a) Tembo holds a one-year put option on Shoprite common stock. The put option canbe exercised at K50. Assume that the expiration date has arrived and the premium isK3. What is the value of the Shoprite put option on the expiration date if:Shoprite common stock is selling at K56 per share?Assume that a financial institution (FI) has purchased 3,500 shares of AB and 7,500shares of CD. The share’s AB current bid and offer are £48.5 and £50.1 respectivelywhile the share’s CD current bid and offer are £101.1 and £101.5 respectively. Supposefurther that the bid–offer spreads are normally distributed with a mean and a standarddeviation of 1% for AB and with a mean of 3% and a standard deviation of 4% for CD.a) Which of the two shares (AB and CD) has the higher cost in terms of execution?Explain b) Calculate the cost of liquidation in a normal market c) Calculate the cost of liquidation in a stressed market at a 95% confidence level.Using your answers to (b), what do you observe?II. Consider a European call option on a non-dividend-paying stock. The following tableshows the value (in £), the delta (Δ), the gamma (Γ) and the theta (Θ) for a longposition in one option: (see the image) a) Using the numbers in the table, if there is an increase of £0.5 in the stock price,explain…
- The shares of TIC Ltd. are currently priced at $ 415 and call option exercisable in three months' time has an exercise rate of $ 400. Risk free interest rate is 5% p.a. and standard deviation (volatility) of share price is 22%. Based on the assumption that TIC Ltd. is not going to declare any dividend over the next three months, what is the price of call option? Solve it on excel.A non-dividend-paying stock has a current price of 800 ngwee. In any unit of time (t, t + 1) the price of the stock either increases by 25% or decreases by 20%. K1 held in cash between times t and t + 1 receives interest to become K1.04 at time t + 1. The stock price after t time units is denoted by St.Required:I. Calculate the risk-neutral probability measure for the model.II. Calculate the price (at t = 0) of a derivative contract written on the stock with expiry date t = 2 which pays 1,000 ngwee if and only if S2 is not 800 ngwee (and otherwise pays 0).ravis Industries plans to issue perpetual preferred stock with an $11.00 dividend. The stock is currently selling for $86.50, but flotation costs will be 6% of the market price, so the net price will be $81.31 per share. What is the cost of the preferred stock, including flotation? Round your answer to two decimal places. %
- Give typing answer with explanation and conclusion The shares of ABC Ltd are currently selling at Shs.290 each at the stock exchange. The exercise price for a 6months call option is Shs260.The prevailing risk free rate is 12%.The variance of ABC ltd share price has been 15%. Required -Determine the value of such an option using Black & Scholes option valuation.Travis Industries plans to issue perpetual preferred stock with an $11.00 dividend. The stock is currently selling for $114.00, but flotation costs will be 6% of the market price, so the net price will be $107.16 per share. What is the cost of the preferred stock, including flotation? Round your answer to two decimal places. %The stock of Bedrock Solutions is currently trading at $24.50 per share. The 1-month put option with strike price of 13.50 is currently selling for $2.16. What's the intrinsic value of this put option?