Question 5 (20 points) Suppose that a trader writes three naked put option contracts, with each contract being on 1 shares of underlying stock. The option price is $3 on each share, the time to maturity is six months, and the strike price is $60. a. Write out the formula and draw the graph for the trader's profit on each put option on 1 share of stock. ( b. What is the margin requirement for the trader if the current stock price is $58? (5 marks) C. How would the answer to (b) change if the trader is buying instead of writing the options? (5 marks

Question 5 (20 points) Suppose that a trader writes three naked put option contracts, with each contract being on 1 shares of underlying stock. The option price is $3 on each share, the time to maturity is six months, and the strike price is $60. a. Write out the formula and draw the graph for the trader's profit on each put option on 1 share of stock. ( b. What is the margin requirement for the trader if the current stock price is $58? (5 marks) C. How would the answer to (b) change if the trader is buying instead of writing the options? (5 marks

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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12. A stock has a current price of $267. A trader writes 9 naked option contracts on the stock, each contract covering 100 shares. The option price is $2, the strike price is $260, and the time to maturity is 4 months. 1. What is the margin requirement if the options are call options (in $)? 2. What is the margin requirement if the options are put options (in $)?The part 2 of the question I cannot find a similar example of.
Finance A stock has a current price of $267. A trader writes 9 naked option contracts on the stock, each contract covering 100 shares. The option price is $2, the strike price is $260, and the time to maturity is 4 months. 1. What is the margin requirement if the options are call options (in $)? 2. What is the margin requirement if the options are put options (in $)?The part 2 of the question I cannot find a similar example of.
A 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.
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You buy a put option on IBM common stock. The option has an exercise price of $136 and IBM’s stock currently trades at $140. The option premium is $5 per contract.a. What is your net profit on the option if IBM’s stock price increases to $150 at expiration of the option and you exercise the option? b. How much of the option premium is due to intrinsic value versus time value?c. What is your net profit if IBM’s stock price decreases to $130?d. Draw the payout diagram at maturity on a short put option position, option premium = $2, and the same exercise price... (Please give the full solution I will upvote)
A stock has a current price of $267. A trader writes 9 naked option contracts on the stock, each contract covering 100 shares. The option price is $2, the strike price is $260, and the time to maturity is 4 months 1. What is the margin requirement if the options are call options (in $)? 2. What is the margin requirement if the options are put options (in $)?
4. Consider a stock with a current price of S0 = $60. The value of the stock at time t = 1 can take one of two values: S1,u = $100, S1,d = $40. The price of a risk-free bond that pays out $1 in period t = 1 is $0.90. (a) Using a one-step binomial tree, write down the possible payoffs of a put option on stock S with strike K = $60 and maturity t = 1. (b) What is the price of this put option? (c) What is the price of a call option with strike K = $60 and maturity t = 1? Please use put-call parity to find the call price.
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