Question 12 A speculator may write a put option on stock with an exercise price of $15 and earn a $3 premium only if he thought O the stock price would stay below $12. Othe stock price would fall below $18. O the stock price would rise above $18 or fall below $12. the stock price would stay above $15.

Question 12 A speculator may write a put option on stock with an exercise price of $15 and earn a $3 premium only if he thought O the stock price would stay below $12. Othe stock price would fall below $18. O the stock price would rise above $18 or fall below $12. the stock price would stay above $15.

Fundamentals of Financial Management (MindTap Course List)

14th Edition

ISBN:9781285867977

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter18: Derivatives And Risk Management

Section18.A: Valuation Of Put Options

Problem 2P

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Question 5: Suppose that a March call option to buy a share for $50 costs $2.50 and is held until March. Under what circumstances will the holder of the option make a profit? Under what circumstances will the option be exercised? Draw a diagram showing how the profit on a long position in the option depends on the stock price at the maturity of the option.Plz explain it
Question 13 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? A ) The loss on the option is$7 B The option should be allowed to lapse C The intrinsic value of the option is - $2 D The profit on the option is $ 3
Aa.8 A put with 1-year to maturity is written on a stock. The current underlying stock price is $20. The option’s exercise price is $18, the interest rate is 3.74%, and the stock’s volatility is 32.7%. The price of a call written on the same stock with the same exercise price and time to maturity is $4.3. Use BSM pricing to determine if put-call parity holds.
Question 4 Consider the following: your purchased a put option on JPM two months ago, with a strike price for the option of $138, and the option expires today. Show work for all parts requiring computation. Suppose the stock price is $152. What is the exercise value? In general, how is the value of a put option affected by time (+/-/None), underlying asset volatility (+/-/None), and the current asset price (+/-/None)?
Required: a-1. If the stock price at option expiration is $143, will you exercise your call? multiple choice 1 Yes No a-2. What is the net profit/loss on your position? (Input the amount as a positive value.) a-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) b-1. Would you exercise the call if you had bought the November call with the exercise price $130?multiple choice 2 Yes No b-2. What is the net profit/loss on your position? (Input the amount as a positive value.) b-3. What is the rate of return on your position? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) c-1. What if you had bought the November put with exercise price $140 instead? Would you exercise the put at a stock price of $140?multiple choice 3 Yes No c-2. What is the rate of return on your position? (Negative value should be indicated by a minus…
Q1. You have purchased a call option on Johnson & Johnson common stock. The option has an exercise price of $57.50 and J & J’s stock currently trades at $58.93. The option premium is $2.17 per contract. Calculate your net profit on the option if J & J’s stock price rises to $62.50 and your exercise the option. Calculate your net profit on the option if J & J’s stock price falls to $58.00 and your exercise the option. If J & J’s stock price falls to $58.00 show that it is more profitable to exercise than not exercise the option you have purchased.
6- A put option (with shares as the underlying asset) was originally purchased for $1.44 and is now trading for $2.82. The exercise price is $34 and the underlying share is currently trading for $31.64. What is the intrinsic value of the option? a. $2.82 b. $0.00 c. $2.36 d. $1.44
Question 1 Options Six months ago you bought for £18 a call option on a stock with an exercise price of £120. If the stock price at expiration of this option is £150, what is your return on investment? A. 167% B. 10% C. 67% D. 8%
speculator may write a put option on stock with an exercise price of $15 and earn a $3 premium only if he thought A-the stock price would rise above $18 or fall below $12. B-the stock price would stay above $15. C-the stock price would stay below $12. D-the stock price would fall below $18.
Problem 4c: State whether the following statements are true or false. In each case, provide a brief explanation. c. An investor would like to purchase a European call option on an underlying stock index with a strike price of 210 and a time to maturity of 3 months, but this option is not actively traded. However, two otherwise identical call options are traded with strike prices of 200 and 220 respectively, hence the investor can replicate a call with a strike price of 210 by holding a static position in the two traded calls.