An investor engages in the following series of transactions: (1) Purchase 1 call option contract of AMD with a strike price of 50 at a price of $4. (2) Purchase 1 put option contract of AMD with a strike price of 50 at a price of $3. What is the maximum possible loss the investor could incur from this options strategy? $700 $100 O $300 Infinite O $400

An investor engages in the following series of transactions: (1) Purchase 1 call option contract of AMD with a strike price of 50 at a price of $4. (2) Purchase 1 put option contract of AMD with a strike price of 50 at a price of $3. What is the maximum possible loss the investor could incur from this options strategy? $700 $100 O $300 Infinite O $400

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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The investor Y decides to: Buy a call option for $5 with $200 as strike price Sell a put option for $10 with $100 as strike price a)Calculate the result of the investor if the market price is $60 b)Calculate the result of the investor if the market price is $260 c)Represent the results of the investor for both cases a) and b) in the same figure
You have the following data on call prices covering the same asset with the same expiration date. Strike Price. Call Option Price $40 -----------$10.50 $45-------------$6.50 $50-------------$3.00 a)Suppose an investor purchases one option with X = $40 and one with X = $50, but sells two options with X = $45. Assuming no transaction costs, in what range of asset prices does the investor make a positive net profit? b)Based on the above strategy, what is the investor’s maximum potential dollar profit and maximum potential dollar loss
MetaAn investor buys a put option contract for S of IBM Inc. stock, with a contract size of ton shares. The stock price is currently $35, and the exercise price is $10. What are the investor's expectations, and under what conditions does the investor make a profit? (1) Is this put option in-the-money? ii) Under what circumstances will the option be exercised? (iv) If at the expiration of the option, the stock price is $ so calculate the profit/loss of the investment and explain what the transactions are? Shall the investor exercise this option?
An investor makes the following three investments: (i) the purchase of a stock for £38(ii) the purchase of a put option for £0.50 with a strike price of £35 and (iii) the sale ofa call option (ie. writing a call option) for £0.50 with a strike price of £40 .(a)What is the intrinsic value and the time value of the put option, What is the maximum profit and loss for this position?
An investor makes the following three investments: (i) the purchase of a stock for £38(ii) the purchase of a put option for £0.50 with a strike price of £35 and (iii) the sale ofa call option (ie. writing a call option) for £0.50 with a strike price of £40 .(a) What is the intrinsic value and the time value of the put option.(b) What is the maximum profit and loss for this position? help me with part (b) please.
An investor makes the following three investments: (i) the purchase of a stock for £38(ii) the purchase of a put option for £0.50 with a strike price of £35 and (iii) the sale ofa call option (ie. writing a call option) for £0.50 with a strike price of £40 .(a) What is the intrinsic value and the time value of the put option and what is the maximum profit and loss for this position?
A trader enters into a long strangle for SGD/USD with a call strike price of 0.7034 and a put strike price of 0.6935. The call option premium on SGD is USD 0.015. The put option premium on SGD is USD 0.026. One option contract represents SGD 3,500,000. What is the net profit of the trader if SGD/USD = 0.7236 at expiry?
Suppose you combine two option contracts as follows. You buy a call option on a stock with an exercise price of $65 for a premium of 9$. At the same time you sell a call option on the same stock with an exercise price of $75 for a premium of $4. Both calls expire at the same time. The stock sells currently at $72. Answer the following questions about this investment strategy: 1. Determinethevalueatexpiration(thepayoffs)andtheprofitunderthefollowingoutcomes: a. The price of the stock at expiration is $78b. The price of the stock at expiration is $69c. Thepriceofthestockatexpirationis$62 2. Determine the following:a. The maximum profit b. The maximum loss 3. Determinethebreakevenstockpriceatexpiration(thestockpriceforwhichyourstrategydeliversno profit and no loss). 4. Depictthepayoffandprofitdiagramsofyourinvestmentstrategy.
An investor owns a put option with a strike price of $ 20, the premium paid was $ 2.The stock price on the option expiration date is $ 25, which is the below statements is correct? The intrinsic value of the option is-$2 The loss on the option is $ 7 The option should be allowed to lapse The profit on the option is $ 3
Suppose you buy a 100-strike call at a premium of $19.46, sell a 120-strikecall at a premium of $11.26, sell a 100-strike put at a premium of $5.45,and buy a 120-strike put at a premium of $15.68. Assume effective annualrisk-free interest rate of 8.5% and the expiration date of the options is oneyear.(a) Verify that there is no price risk in this transaction.(b) What is the initial cost of the position?(c) What is the value of the position at expiration?
The investor X decides to: Buy a call option for $10 with $100 as strike price Buy a call option for $15 with $90 as the strike price Sell a put option for $10 with $100 as the strike price Buy a put option for $15 with $120 as the strike price a)Calculate the result of the investor if the market price is $60 b)Calculate the result of the investor if the market price is $160 c)Represent the results of the investor for both cases a) and b) in the same figure
A speculator has purchased United States dollar put options, with an exercise price of A$1.30and a premium of A$0.05 per unit.(a) Calculate the break-even price.(b) Calculate the profit or loss of the option for the speculator if the spot rate at the time the speculator considers exercising the options is : (1) A$1.20 (2) A$1.28 (3) A$1.34.(c) What is the maximum profit and maximum loss for the speculator?

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