The delta of collar when stock price is incremented by $1. Introduction: Total delta: The total delta value is sum of the stock price, long call value and short call value.

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Answer 1

Question

Chapter 21, Problem 29PS

a.

Summary Introduction

To calculate: The delta of collar when stock price is incremented by $1.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

b.

Summary Introduction

To explain: Effect on delta value of the portfolio when stock price is very high.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

c.

Summary Introduction

To explain: Effect on delta value of portfolio when stock prices are decreases.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

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A collar is established by buying a share of stock for $50, buying a 6-month put option with exercise price $45, and writing a 6-month call option with exercise price $55. On the basis of the volatility of the stock, you calculate that for a strike price of $45 and expiration of 6 months, N(d1) = .60, whereas for the exercise price of $55, N(d1) = .35.a. What will be the gain or loss on the collar if the stock price increases by $1?b. What happens to the delta of the portfolio if the stock price becomes very large?c. What happens to the delta of the portfolio if the stock price becomes very small?

A collar is established by buying a share of stock for $54, buying a 6-month put option with exercise price $47, and writing a 6-month call option with exercise price $61. On the basis of the volatility of the stock, you calculate that for a strike price of $47 and expiration of 6 months, N(d1) = 0.7298, whereas for the exercise price of $61, N(d1) = 0.6374. Required: What will be the gain or loss on the collar if the stock price increases by $1? What happens to the delta of the portfolio if the stock price becomes very large? What happens to the delta of the portfolio if the stock price becomes very small?

A collar is established by buying a share for 50, buying a 6-month put option with exercise price 45, and writing a call option with exercise price 55. On the basis of the volatility of the stock, you calculate that at a strike price of 45 and expiration of 6 months, N(d1) =0.6 whereas for the exercise price of 55, N(d1) = 0.35 What will be the gain or loss on the collar if the stock price increases by 1? What happens to the delta of the portfolio if the stock price becomes very large?

Answer 2

Question

Chapter 21, Problem 29PS

a.

Summary Introduction

To calculate: The delta of collar when stock price is incremented by $1.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

b.

Summary Introduction

To explain: Effect on delta value of the portfolio when stock price is very high.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

c.

Summary Introduction

To explain: Effect on delta value of portfolio when stock prices are decreases.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

Expert Solution & Answer

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See solution

Answer 3

Question

Chapter 21, Problem 29PS

a.

Summary Introduction

To calculate: The delta of collar when stock price is incremented by $1.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

b.

Summary Introduction

To explain: Effect on delta value of the portfolio when stock price is very high.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

c.

Summary Introduction

To explain: Effect on delta value of portfolio when stock prices are decreases.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 21, Problem 29PS

a.

Summary Introduction

To calculate: The delta of collar when stock price is incremented by $1.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

b.

Summary Introduction

To explain: Effect on delta value of the portfolio when stock price is very high.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

c.

Summary Introduction

To explain: Effect on delta value of portfolio when stock prices are decreases.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

Expert Solution & Answer

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See solution

Answer 5

Chapter 21, Problem 29PS

a.

Summary Introduction

To calculate: The delta of collar when stock price is incremented by $1.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

b.

Summary Introduction

To explain: Effect on delta value of the portfolio when stock price is very high.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

c.

Summary Introduction

To explain: Effect on delta value of portfolio when stock prices are decreases.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

Answer 6

Chapter 21, Problem 29PS

a.

Summary Introduction

To calculate: The delta of collar when stock price is incremented by $1.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

Answer 7

Chapter 21, Problem 29PS

a.

Summary Introduction

To calculate: The delta of collar when stock price is incremented by $1.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

Answer 8

b.

Summary Introduction

To explain: Effect on delta value of the portfolio when stock price is very high.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

Answer 9

b.

Summary Introduction

To explain: Effect on delta value of the portfolio when stock price is very high.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

Answer 10

c.

Summary Introduction

To explain: Effect on delta value of portfolio when stock prices are decreases.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

Answer 11

c.

Summary Introduction

To explain: Effect on delta value of portfolio when stock prices are decreases.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

Answer 12

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Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 21 - Prob. 1PS Ch. 21 - Prob. 2PS Ch. 21 - Prob. 3PS Ch. 21 - Prob. 4PS Ch. 21 - Prob. 5PS Ch. 21 - Prob. 6PS Ch. 21 - Prob. 7PS Ch. 21 - Prob. 8PS Ch. 21 - Prob. 9PS Ch. 21 - Prob. 10PS

The delta of collar when stock price is incremented by $1. Introduction: Total delta: The total delta value is sum of the stock price, long call value and short call value.

Solution Summary: The author calculates the delta of collar when stock price is incremented by 1.

Videos

To calculate: The delta of collar when stock price is incremented by $1.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

To explain: Effect on delta value of the portfolio when stock price is very high.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

To explain: Effect on delta value of portfolio when stock prices are decreases.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

Want to see the full answer?

Chapter 21 Solutions

The delta of collar when stock price is incremented by $1. Introduction: Total delta: The total delta value is sum of the stock price, long call value and short call value.

Solution Summary: The author calculates the delta of collar when stock price is incremented by 1.

Videos

To calculate: The delta of collar when stock price is incremented by $1. Introduction: Total delta: The total delta value is sum of the stock price, long call value and short call value.

To explain: Effect on delta value of the portfolio when stock price is very high. Introduction: Total delta: The total delta value is sum of the stock price, long call value and short call value.

To explain: Effect on delta value of portfolio when stock prices are decreases. Introduction: Total delta: The total delta value is sum of the stock price, long call value and short call value.

Want to see the full answer?

Chapter 21 Solutions

To calculate: The delta of collar when stock price is incremented by $1.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

To explain: Effect on delta value of the portfolio when stock price is very high.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.

To explain: Effect on delta value of portfolio when stock prices are decreases.

Introduction:

Total delta: The total delta value is sum of the stock price, long call value and short call value.