Petra is an option writer of Australian dollar (A$) options. In anticipation of an appreciation of the Australian dollar from its current level of $0.62 to $0.65, she has written a put option of A$150,00O with an exercise price of $0.635 and a premium of $0.015. If the spot rate at the option's maturity tums out to be $0.59, what is Petra's total profit or loss (assuming the buyer of the option acts rationally)? O $4,500 O s0 O $4,500 O -$2,250
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- Andrea is an option speculator. She anticipates the Canadian dollar to depreciate from its current level of 0.90 USD/CAD to 0.85 USD/CAD. Currently, Canadian dollar call options are available with an exercise price of 0.91 USD/CAD and a premium of $0.02. Also, Canadian dollar put options are available with an exercise price of 0.88 USD/CAD and a premium of $0.02. If the future spot rate of the Canadian dollar is 0.85 USD/CAD, what is Andrea's net profit or loss per unit?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?Rebecca is interested in purchasing an European call on a hot new stock, Up, Inc. The call has a strike price of $100 and expires in 90 days . The current price of Up stock is $120, and the stock has a standard deviation of 40% per year. The risk-free interest rate is 6.18% per year. a). Using the Black - Scholes formula , compute the price of the call b). Use put-call parity to compute the price of the put with the same strike and expiration date
- Rachel is considering an investment in Yonan Communications, whose stockcurrently sells for $65. A put option on Yonan’s stock, with an exercise price of $60, has amarket value of $2.90. Meanwhile, a call option on the stock with the same exercise priceand time until expiration has a market value of $9.13. The market believes that at the expirationof the options, the stock price will be $55 or $75 with equal probability.a. What is the premium associated with the put option? The call option?b. If Yonan’s stock price increases to $75, what would be the return to an investor whobought a share of the stock? If the investor bought a call option on the stock? If theinvestor bought a put option on the stock?c. If Yonan’s stock price decreases to $55, what would be the return to an investor whobought a share of the stock? If the investor bought a call option on the stock? If theinvestor bought a put option on the stock?d. If Rachel buys 0.5 share of Yonan Communications and sells one call…The USDJPY spot price is 115.018 and the one month forward is 115.046. A one month expiration European style call option with a strike price of 115.046 is trading at 4¥ and a put option with the same parameters is trading at 5¥. If we purchase the call and sell the put sketch the payoff of this position at expiry over the range 114.900 to 115.140. If we were going to hedge an exposure to the Yen should we use the option position or the forward? Justify your answer.A trader focuses principally on the Australian Dollar/Singapore Dollar (A$/S$) cross-rate. The current spot rate is S$0.9/A$. The trader expects after 2 months the cross rate will be S$0.79/A$. The trader plans to purchase an option, and has the following choices: A CALL option on S$ has a strike price of S$0.85/A$ and a premium of A$0.00037/S$. A PUT option on S$ has a strike price of S$0.85/A$ and a premium of A$0.00048/S$. i. Determine if the trader should buy a PUT option or a CALL option on S$. ii. If the trader buys the option decided in (i), determine net profit for the trader if the spot rate after 2 months is as the trader expects. iii. If the spot rate after 2 months is not what the trader expected and is S$0.61/A$, will the option the trader buys be at-the-money, or in-the-money, or out-of-the-money? [[Notably, the trader is purchasing option on S$ -- meaning S$ is the foreign currency in this instance]]
- You are considering a European put option and a European call option on ABC Ltd and have available the following information. The put option with an exercise price of $15 and time to maturity of 60 days is priced at $2.00. The call option with the same exercise price and time to maturity is priced at $3.00. The underlying asset price is $15. The risk-free rate is 2% per 60 days. Could an arbitrage profit be earned? If so, how much the arbitrage profit is? Show your works (Hint: use discrete put-call parity equation and consider two scenarios for stock price at maturity of the options: $10 or $20).There is a European call option on the dollar with strike price of Kc = 94 pence per dollar and a European put option on the dollar with a strike price of Kp = 100 pence per dollar. Both have a notional N = 1 and both expire at date T. The current (date t) price of one dollar is St = 100 pence. The current prices of call option is 27.5 (55/2) pence and the price of the put option is 8.33 (25/3) pence. The sterling interest rate for borrowing and lending between dates t and T is 20% (1/5) and the corresponding dollar interest rate is 25% (1/4). Whatarethecurrent (datet) intrinsic and time value of the call and put options?What is the total option payoHf if you buy one European put option ( 100 sharea) with a sthike of 543 , an option peice pet ahare of 93,65 , and atock price of 545 at opton expiralion?
- An investor buys a European call option at a price of 7.6 yuan. The stock price is 52 yuan and the strike price is 55 yuan. Under what circumstances will the investor make a profit ? Under what circumstances will the option be executed ? Draw a diagram of the relationship between investor profitability and stock price at maturity.Suppose we have both a European call option and put option with an exercise price of $53 and the underlying stock is currently priced at $50. We are to note also that both options will expiry in six months. Further, market surveys suggest that the price of the stock can either go up by 20% or decrease by 25%. The current risk-free rate of interest is 2% per annum. Required: (a) What is the expected price of the underlying asset at expiry date? (b) What is the value of the call option, using the binomial model? (c) If the put option is selling for $4.80, what should be the price of the call option to avoid arbitrage?Chandrika is short a European call option with strike price 11.00. Theoption expires in 3 months, the spot price is $10.75, the stock volatility is29.00%, the risk free interest rate is 7.50% and the stock dividend rate is0.75%. Chandrika delta hedges the position initially and then doesn’t adjustthe delta hedge. When the option expires, the stock price is 12.75. Usingthe Black Scholes model, compute her profit or loss.A) -0.21B) -0.25C) -0.30D) -0.16E) -0.22