You own a call option on Intuit stock with a strike price of $40. The option will expire in exactly three months time. If the stock is trading at $55 in three months, what will be the payoff of the call? Note: practice drawing the payoff diagram.
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You own a call option on Intuit stock with a strike price of $40. The option will expire in exactly three months time. If the stock is trading at $55 in three months, what will be the payoff of the call? Note: practice drawing the payoff diagram.
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- Binomial Model The current price of a stock is 20. In 1 year, the price will be either 26 or 16. The annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price of 21 and that expires in 1 year. (Hint: Use daily compounding.)Assume you own a call option on Yahoo stock with a strike price of $40. The option will expire in exactly three months time. If the stock is trading at $55 in three months time, what will be the payoff of the call?You own a call option on Intuit stock with a strike price of $40. The option will expire in exactly three months’ time. If the stock is trading at $55 in three months, what will be the payoff of the call? Note: practice drawing the payoff diagram. Assume that you have shorted the call option in Question 2. If the stock is trading at $55 in three months, what will you owe? Note: practice drawing the payoff diagram. (ONLY ANSWER THIS QUESTION)
- You shorted a call option on Intuit stock with a strike price of $38. When you sold (wrote) the option, you received $3. The option will expire in exactly three months' time. a. If the stock is trading at $49 in three months, what will your payoff be? What will your profit be? b. If the stock is trading at $35 in three months, what will your payoff be? What will your profit be? c. Draw a payoff diagram showing the payoff at expiration as a function of the stock price at expiration. d. Redo c, but instead of showing payoffs, show profits. Question content area bottom Part 1 a. The payoff of the short is $ short is $ enter your response here. enter your response here, and the profit of the. Please step by step answer.Assume you own a call option on IBM stock with a strike price of $40. The option will expire in exactly six months time. If the stock is trading at $35 in six months, what will be the payoff of the call? Options for above is { $0.00 , $10,00 , $15.00 , $75.00 , $95.00 } Assume that you have shorted the call option described above, if the stock is trading at $55 in six months, what will you owe?Options for above is { $0.00 , $10.00 , $15.00 , $75.00 , $95.00 }If the stock is trading at $50 in six months, what will be the payoff of the call?Options for above is { $0.00 , $10.00 , $15.00 , $75.00 , $95.00 }You Consider a stock with a price of $50 that is expected to increase by 6% or decrease by 8% each month over the next two months. Having a risk-free rate at 3% per year with continuous compounding, calculate the value of a two-month Anmerican put option with a strike price of $55.
- You need to price a put option on the stock of APPLE with an exercise price of $50 and six months to expiration. The current stock price of APPLE is $52, the risk-free rate is 10% p.a. (c.c.) and the volatility of the stock price of APPLE is 30% p.a. APPLE will pay a dividend of $1 in exactly four months’ time. This put option is to be priced using a two-period binomial option pricing model, with three months in each period. QUESTION: Draw the two-period tree diagram for the adjusted stock price (that recognizes the impact of the dividend) of APPLE. Show the expiration date payoffs from the put option.Assume that the current stock price is $50 per share, that call options can be purchased with an exercise price of $60 per share, that bank loans can be obtained for a 10 percent nominal rate, and that at expiration of the option in three months, the stock will either be valued at $30 or $70. Show that it is possible to replicate the stock payoff by borrowing and buying a call option.TreeOlivia's stock price is $180 and could halve or double in each six-month period. The interest rate is 12% a year. What is the value of a six-month call option on TreeOlivia with an exercise price of $120? What is the option delta for the six-month call with an exercise of $120? The payoffs of the six-month call option can be replicated by buying shares of stock and borrowing. What amount should be invested in stock and what amount must be borrowed? Assume the exercise price is $120. What is the value of the one-year call option on TreeOlivia with an exercise of $150? (Hint: use the two-step binominal tree) What is the value of the one-year put option on TreeOlivia with an exercise of $150?
- A stock currently trades for $120 per share. Call options on the stock are available with a strike price of $125. The options expire in one month. The annualized risk free rate is 3%, and the expected volatility (annual) for the stock is 35%. Use the Black-Scholes option pricing model to calculate the price of the call option.The common stock of the CGI Inc. has been trading in a narrow range around $35 per share for months, and you believe it is going to stay in that range for the next three months. The price of a three-month put option with an exercise price of $35 is $2, and a call with the same expiration date and exercise price sells for $3. Suppose you write a strap ( = write 2 calls and write 1 put with the same strike price) and the stock price winds up to be $37 at contract expiration. What was your net profit on the strap? A. $200 B. $300 C. $400 D. $500 E. $700). Suppose the call option of Tesla company has an exercise price of $200 and expires in 90 days. Assume the current price of Tesla stock is $240, with a standard deviation of 40% per year. The risk-free interest rate is 6.18% per year. First, using the Black-Scholes formula, compute the price of the call. And then use put-call parity to compute the price of the put with the same strike and expiration date. Based on put-call parity, what should be the put option price? a. $ 2.65 b. $ 1.78 c. $ 3.69 d. $ 4.22 e. None of the above
