(please correct answer and Step by step solutions this question) Assume you have taken a long position in an Amazon 1,850 Strike Price Call option. The $1,850 Strike Price Call option premium = $25. Amazon is currently trading at $1,865, the short-term interest rate = 2% and there are 2 months until expiry. Two months later, at expiration, Amazon had rallied to $1,875. What is the profit or loss on your Amazon 1,850 Strike Price Call option?

(please correct answer and Step by step solutions this question) Assume you have taken a long position in an Amazon 1,850 Strike Price Call option. The $1,850 Strike Price Call option premium = $25. Amazon is currently trading at $1,865, the short-term interest rate = 2% and there are 2 months until expiry. Two months later, at expiration, Amazon had rallied to $1,875. What is the profit or loss on your Amazon 1,850 Strike Price Call option?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter5: Currency Derivatives

Section: Chapter Questions

Problem 5ST

See similar textbooks

Similar questions

Assume you have taken a long position in an Amazon 1,850 Strike Price Call option. The $1,850 Strike Price Call option premium = $25. Amazon is currently trading at $1,865, the short-term interest rate = 2% and there are 2 months until expiry. Two months later, at expiration, Amazon had rallied to $1,875. What is the profit or loss on your Amazon 1,850 Strike Price Call option? (Please step by step solutions)
4. Consider a call option on the S&R index with 6 months to expiration and a strike price of $1000. Suppose that the effective rate compounded semiannually is 2% and the premium for this call is $93.81. (a) Draw the payoff and profit graphs for the call option holder. (b) If the S&R index price at expiration is $1100, will the owner exercise this option? What is the profit? (c) If the S&R index price at expiration is $900, will the owner exercise this option? What is the profit?
Give typing answer with explanation and conclusion to all parts Consider a put option whose underlying asset is a stock index with 6 months to expiration and a strike price of $1000. Suppose the risk-free interest rate for the six months is 2% and that the option’s premium is $74.20. (a) Find the future premium value in six months. (b) What is the buyer’s profit is the index spot price is $1100? (c) What is the buyer’s profit is the index spot price is $900
Question 2. You have been asked to value a Arithmetic Lookback option which expires in six months time. At the end of the six months the buyer is paid the arithmetic mean of the underlying stock over the contract period. Using the compressed stock tree presented in Figure 1 and assuming an annual interest rate of 4.5% determine the fair price of the Arithmetic Lookback option. Why are Lookback options considered to he expensive? 182.5 158.7 138 138 120 120 104.4 104.4 90.8 79 Figure 1: Compressed stock tree
The current stock price of IBM is $63 . A put option on IBM with an exercise price of $68 sells for $5 and expires in 4 month(s). If the risk-free rate is 1.4% per year, what is the price of a call option on IBM with the same exercise price and expiration date (keep two decimal places)? Your Answer: Answer
suppose you buy an non-dividend paying asset at $50 and sell a 6 month futures contract at $53. What is your profit or lost at expiration if the asset price down to $47? current 6 month interest is 0.25% p.a. (Ignore carrying costs and transaction cost)? What happens to the basis through the contract's life? a.none of the above b.it initially decreases, then increases c.it initially increases, then decreases d.it moves toward zero at expiry e.it remains relatively steady
A put currently has a strike price of $54 and a maturity of six months. what will be the profit/loss in each scenario to an investor who buys the put for $6.40? (a)$44 (b)$49 (c)$54 (d)$59 (e)$64
A put option and call option with an exercise price of $50 expire in four months and sell for $5.99 and $8.64, respectively. If the stock is currently priced at $52.27, what is the annual continuously compounded rate of interest? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Rate of interest %
An investor enters a threeyear swap contracts by paying fixed price and receive spot price of Apple’s stock at the end of each year. The spot price of Apple’s stock is $515 now, and the risk-free rate is 3%. 1.Draw the synthetic forwards contracts to mimicking this swap contract. 2.Compute the rational fixed price based on arbitrage-free principal.
A one year call option contract of Office Pro sells for $2,200. In one year, the stock price will be either $20 or $30. The exercise price on the call option is $15. What is the current value of the option if the risk-free rate is 8 percent? A.$ 3.48 B.$ 2.78 C.$ 8.11 D.It is impossible to determine with the given information.
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)
You have written a call option on Walmart common stock. The option has an exercise price of $81, and Walmart’s stock currently trades at $79. The option premium is $1.60 per contract. a. How much of the option premium is due to intrinsic value versus time value? b. What is your net profit if Walmart’s stock price decreases to $77 and stays there until the option expires? c. What is your net profit on the option if Walmart’s stock price increases to $87 at expiration of the option and the option holder exercises the option?