The approach best suitable to meet the client’s objective which gives a good option of larger gains or losses between now and at the end of the year. (i) Long straddle (ii)Long bullish spread (iii) Short straddle Introduction: Long straddle: It is one of the option strategies. It is supposed to be a combination of buying both call options and put options at the same strike or exercise price and with the same expiry period. When both these options are combined, they release in producing a position which depicts profit in both the case of an increase or decrease in stock prices.

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Answer 1

Question

Chapter 20, Problem 9PS

a.

Summary Introduction

To analyze: The approach best suitable to meet the client’s objective which gives a good option of larger gains or losses between now and at the end of the year. (i) Long straddle
(ii)Long bullish spread (iii) Short straddle

Introduction:

Long straddle: It is one of the option strategies. It is supposed to be a combination of buying both call options and put options at the same strike or exercise price and with the same expiry period. When both these options are combined, they release in producing a position which depicts profit in both the case of an increase or decrease in stock prices.

b.

Summary Introduction

To analyze: The approach best suitable to meet the client’s objective which gives a good option of larger losses between now and at the end of the year. (i) Long put options
(ii)Short call options (iii)Long call options.

Introduction:

Long put position: It is one of the options' strategies and suits best in a situation where investor purchases put options with a strong belief that the price of the underlying stock or asset will definitely decrease in future and will result to be less than the strike price before the expiry of the contract period.

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You are a portfolio manager who uses options positions to customize the risk profile of your clients. In each case, what strategy is best given your client’s objective?a. ∙ Performance to date: Up 16%.∙ Client objective: Earn at least 15%.∙ Your scenario: Good chance of large gains or large losses between now and end of year.i. Long straddle.ii. Long bullish spread.iii. Short straddle. b. ∙ Performance to date: Up 16%.∙ Client objective: Earn at least 15%.∙ Your scenario: Good chance of large losses between now and end of year.i. Long put options.ii. Short call options.iii. Long call options.

During a particular year, the T-bill rate was 6%, the market return was 14%, and a portfolio manager with beta of .5 realized a return of 10%.a. Evaluate the manager based on the portfolio alpha.b. Reconsider your answer to part (a) in view of the Black-Jensen-Scholes finding that the security market line is too flat. Now how do you assess the manager’s performance?

You are a portfolio manager who uses options positions to customize the risk profile of your clients. In the following case, which of the following is best given your client’s objective? Performance to date: Up 16%. Client objective: Earn at least 15%. Your scenario: Good chance of large stock price losses between now and end of year. Question 4 options: write put options purchase call options write call options purchase put options

Answer 2

Question

Chapter 20, Problem 9PS

a.

Summary Introduction

To analyze: The approach best suitable to meet the client’s objective which gives a good option of larger gains or losses between now and at the end of the year. (i) Long straddle
(ii)Long bullish spread (iii) Short straddle

Introduction:

Long straddle: It is one of the option strategies. It is supposed to be a combination of buying both call options and put options at the same strike or exercise price and with the same expiry period. When both these options are combined, they release in producing a position which depicts profit in both the case of an increase or decrease in stock prices.

b.

Summary Introduction

To analyze: The approach best suitable to meet the client’s objective which gives a good option of larger losses between now and at the end of the year. (i) Long put options
(ii)Short call options (iii)Long call options.

Introduction:

Long put position: It is one of the options' strategies and suits best in a situation where investor purchases put options with a strong belief that the price of the underlying stock or asset will definitely decrease in future and will result to be less than the strike price before the expiry of the contract period.

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Answer 3

Question

Chapter 20, Problem 9PS

a.

Summary Introduction

To analyze: The approach best suitable to meet the client’s objective which gives a good option of larger gains or losses between now and at the end of the year. (i) Long straddle
(ii)Long bullish spread (iii) Short straddle

Introduction:

Long straddle: It is one of the option strategies. It is supposed to be a combination of buying both call options and put options at the same strike or exercise price and with the same expiry period. When both these options are combined, they release in producing a position which depicts profit in both the case of an increase or decrease in stock prices.

b.

Summary Introduction

To analyze: The approach best suitable to meet the client’s objective which gives a good option of larger losses between now and at the end of the year. (i) Long put options
(ii)Short call options (iii)Long call options.

Introduction:

Long put position: It is one of the options' strategies and suits best in a situation where investor purchases put options with a strong belief that the price of the underlying stock or asset will definitely decrease in future and will result to be less than the strike price before the expiry of the contract period.

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Answer 4

Question

Chapter 20, Problem 9PS

a.

Summary Introduction

To analyze: The approach best suitable to meet the client’s objective which gives a good option of larger gains or losses between now and at the end of the year. (i) Long straddle
(ii)Long bullish spread (iii) Short straddle

Introduction:

Long straddle: It is one of the option strategies. It is supposed to be a combination of buying both call options and put options at the same strike or exercise price and with the same expiry period. When both these options are combined, they release in producing a position which depicts profit in both the case of an increase or decrease in stock prices.

b.

Summary Introduction

To analyze: The approach best suitable to meet the client’s objective which gives a good option of larger losses between now and at the end of the year. (i) Long put options
(ii)Short call options (iii)Long call options.

Introduction:

Long put position: It is one of the options' strategies and suits best in a situation where investor purchases put options with a strong belief that the price of the underlying stock or asset will definitely decrease in future and will result to be less than the strike price before the expiry of the contract period.

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Answer 5

Chapter 20, Problem 9PS

a.

Summary Introduction

To analyze: The approach best suitable to meet the client’s objective which gives a good option of larger gains or losses between now and at the end of the year. (i) Long straddle
(ii)Long bullish spread (iii) Short straddle

Introduction:

Long straddle: It is one of the option strategies. It is supposed to be a combination of buying both call options and put options at the same strike or exercise price and with the same expiry period. When both these options are combined, they release in producing a position which depicts profit in both the case of an increase or decrease in stock prices.

b.

Summary Introduction

To analyze: The approach best suitable to meet the client’s objective which gives a good option of larger losses between now and at the end of the year. (i) Long put options
(ii)Short call options (iii)Long call options.

Introduction:

Long put position: It is one of the options' strategies and suits best in a situation where investor purchases put options with a strong belief that the price of the underlying stock or asset will definitely decrease in future and will result to be less than the strike price before the expiry of the contract period.

Answer 6

Chapter 20, Problem 9PS

a.

Summary Introduction

To analyze: The approach best suitable to meet the client’s objective which gives a good option of larger gains or losses between now and at the end of the year. (i) Long straddle
(ii)Long bullish spread (iii) Short straddle

Introduction:

Long straddle: It is one of the option strategies. It is supposed to be a combination of buying both call options and put options at the same strike or exercise price and with the same expiry period. When both these options are combined, they release in producing a position which depicts profit in both the case of an increase or decrease in stock prices.

Answer 7

Chapter 20, Problem 9PS

a.

Summary Introduction

To analyze: The approach best suitable to meet the client’s objective which gives a good option of larger gains or losses between now and at the end of the year. (i) Long straddle
(ii)Long bullish spread (iii) Short straddle

Introduction:

Long straddle: It is one of the option strategies. It is supposed to be a combination of buying both call options and put options at the same strike or exercise price and with the same expiry period. When both these options are combined, they release in producing a position which depicts profit in both the case of an increase or decrease in stock prices.

Answer 8

b.

Summary Introduction

To analyze: The approach best suitable to meet the client’s objective which gives a good option of larger losses between now and at the end of the year. (i) Long put options
(ii)Short call options (iii)Long call options.

Introduction:

Long put position: It is one of the options' strategies and suits best in a situation where investor purchases put options with a strong belief that the price of the underlying stock or asset will definitely decrease in future and will result to be less than the strike price before the expiry of the contract period.

Answer 9

b.

Summary Introduction

To analyze: The approach best suitable to meet the client’s objective which gives a good option of larger losses between now and at the end of the year. (i) Long put options
(ii)Short call options (iii)Long call options.

Introduction:

Long put position: It is one of the options' strategies and suits best in a situation where investor purchases put options with a strong belief that the price of the underlying stock or asset will definitely decrease in future and will result to be less than the strike price before the expiry of the contract period.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 20 - Prob. 1PS Ch. 20 - Prob. 2PS Ch. 20 - Prob. 3PS Ch. 20 - Prob. 4PS Ch. 20 - Prob. 5PS Ch. 20 - Prob. 6PS Ch. 20 - Prob. 7PS Ch. 20 - Prob. 8PS Ch. 20 - Prob. 9PS Ch. 20 - Prob. 10PS

Solution Summary: The author explains that long straddle is a combination of buying both call options and put options at the same strike or exercise price and with same expiry period.

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