Which of the following could be a delta-neutral portfolio? (choose all that apply) A long position in call options plus a short position in the underlying stock A short position in call options plus a long position in the underlying stock A long position in put options and a long position in the underlying stock A short position in put options plusa long posinion in the underlying stock

Which of the following could be a delta-neutral portfolio? (choose all that apply) A long position in call options plus a short position in the underlying stock A short position in call options plus a long position in the underlying stock A long position in put options and a long position in the underlying stock A short position in put options plusa long posinion in the underlying stock

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 6MC

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Similar questions

Both call and put options are affected by the following five factors: the exercise price, the underlying stock price, the time to expiration, the stock’s standard deviation, and the risk-free rate. However, the direction of the effects on call and put options could be different. Use the following table to identify whether each statement describes put options or call options. Statement Put Option Call Option 1. An option is more valuable the longer the maturity. 2. A longer maturity in-the-money option on a risky stock is more valuable than the same shorter maturity option. 3. When the exercise price increases, option prices increase. 4. As the risk-free rate increases, the value of the option increases.
In the Black-Scholes option pricing model, the value of a call is inversely related to: a. the risk-free interest stock b. the volatility of the stock c. its time to expiration date d. its stock price e. its strike price
Explain in detail with an example how the change of the variables (like Stock Price, Exercise Price, Risk-Free Rate, Volatility or Standard Deviation, and Time to Expiration) of Black-Scholes-Merton Formula affect the price of the option.
Describe the effect of a change in each of the following factorson the value of a call option: (1) stock price, (2) exercise price,(3) option life, (4) risk-free rate, and (5) stock return standarddeviation (i.e., risk of stock).
Draw the profit diagram (profit not payoff) of a portfolio consisting of a long position in two call options with exercise price ?, a short position in five call options with exercise price 2? and a long position in four call options with exercise price 3?. All options have the same maturity date and the same underlying stock. Clearly state any assumptions made. Is the cost of the portfolio positive?
Carefully draw the payoff diagram of a portfolio consisting of a long position in two call options with exercise price ?, a short position in five call options with exercise price 2? and a long position in four call options with exercise price 3?. All options have the same maturity date and the same underlying stock. What reasons could a speculator have for holding such a portfolio (explain in detail)?
What is Put-Call Parity (select the best answer)? Group of answer choices Put-Call Parity suggests that puts and calls have equal, but opposite, values. Uses arbitrage arguments showing that a portfolio of the underlying stock plus a put has the exact same payoffs as a portfolio of a risk-free bond plus a call. Thus, those two portfolios must have equal value. Uses arbitrage arguments to show that the value of a Put is equal to the value of a Call plus the Stock Price. Uses arbitrage arguments to show that the value of a Call is equal to the value of the underlying stock plus the value of a Put.
Please explain & give me some example that how fund manager use option to hedge their stock portfolio from volatility of underlying asset by use these 4 strategy: long call option, short call option, long put option & short put option.
What impact does each of the followingparameters have on the value of a call option?(1) Current stock price
Select all that are true with respect to the Black Scholes Option Pricing Model (BSOPM) Group of answer choices When using BSOPM to value a stock option, the BSOPM assumes that stock prices follow a normal distribution. When using BSOPM to value a stock option, the BSOPM assumes that stock returns follow a normal distribution. Half of the observations in a normal distribution are above the mean and half are below the mean. Fisher Black and Myron Scholes were awarded the Nobel Prize in 1997 for their work in Option Pricing.
Is a put option on a high-beta stock worth more than one on a low-beta stock? The stocks have identical firm-specific risk.
Both call and put options are affected by the following five factors: the exercise price, the underlying stock price, the time to expiration, the stock’s standard deviation, and the risk-free rate. However, the direction of the effects on call and put options could be different. Use the following table to identify whether each statement describes put options or call options. Statement Put Option Call Option 1. When the exercise price increases, option prices increase. 2. An option is more valuable the longer the maturity. 3. The effect of the time to maturity on the option prices is indeterminate. 4. As the risk-free rate increases, the value of the option increases.