Question

A stock is currently priced at $130. The following options, with expiration in 4 months, are available:

K | c | p |

120 | 12.80 | 1.85 |

125 | 8.65 | 3.11 |

130 | 5.05 | 4.85 |

135 | 2.61 | 7.55 |

140 | 1.10 | 11 |

Use call options with strike prices of 130 and 135 to create a bull spread. What is the breakeven stock price (in 4 months)?

Answer #1

In bull spread , call option whith lower strike is bought and call option with higher strike price is sold. This strategy is used when investor expects moderate rise in price of asset

Here Call option with strike price of $ 130 is bought and Call option with strike price of $ 135 is sold

Thus net premium paid = Premium paid for buying call option with strike price of $ 130 - Premium received for selling call option with strike price of $135

= 5.05 - 2.61

= $ 2.44

Break even price = strike price of call option purchased + Net Premium paid

= 130 + 2.44

= 132.44 $

A stock is currently priced at $130. The following options, with
expiration in 4 months, are available:
K
c
p
120
12.80
1.85
125
8.65
3.11
130
5.05
4.85
135
2.61
7.55
140
1.10
11
Use put options with strike prices of 125 and 135 to create a
bear spread.
(a) If the stock price in 3 months is $128, what is your
payoff?
(b) What is your maximum possible payoff and when does it
occur?

The following prices are available for call and put options on a
stock priced at $50. The risk-free rate is 6 percent and the
volatility is 0.35. The March options have 90 days remaining and
the June options have 180 days remaining.
Strike
March (calls)
June (calls)
March (puts)
June (puts)
45
6.84
8.41
1.18
2.09
50
3.82
5.58
3.08
4.13
55
1.89
3.54
6.08
6.93
Use this information to answer the following questions. Assume
that each transaction consists of...

The following prices are available for call and put options on a
stock priced at $50. The risk-free rate is 6 percent and the
volatility is 0.35. The March options have 90 days remaining and
the June options have 180 days remaining.
Calls
Puts
Strike
March
June
March
June
45
6.84
8.41
1.18
2.09
50
3.82
5.58
3.08
4.13
55
1.89
3.54
6.08
6.93
Use this information to answer the following questions. Assume
that each transaction consists of one contract...

The following prices are available for call and put options on a
stock priced at $60. The risk-free rate is 4 percent and the
volatility is 0.35. The March options have 90 days remaining and
the June options have 180 days remaining.
Calls
Puts
Strike
March
June
March
June
55
7.2
8.4
1.7
2.9
60
2.5
3.7
3.2
4.8
65
1.8
2.4
6.4
7.5
For questions 19 through 23, consider a bull money spread using
the March 55/60 calls.
19. ...

Question 1. Given the price of a stock is $21,
the maturity time is 6 months, the strike price is $20 and the
price of European call is $4.50, assuming risk-free rate of
interest is 3% per year continuously compounded, calculate the
price of the European put option?
Hint: Use put-call parity relationship.
Note: Bull spreads are used when the investor believes
that the price of stock will increase. A bull spread on calls
consists of going long in a...

The prices of European call and put options on a
non-dividend-paying stock with 12 months to maturity, a strike
price of $120, and an expiration date in 12 months are $25 and $5,
respectively. The current stock price is $135. What is the implied
risk-free rate?
Draw a diagram showing the variation of an investorâ€™s profit and
loss with the terminal stock price for a portfolio consisting
of
One share and a short position in one call option
Two shares...

Sugar Land stock is selling for $47 and has the following
six-month options outstanding.
Strike Price
Option Market Price
Call Option
$45
$4
Call option
$50
$1
e. Estimate profit and loss if the investor buys the stock and
sells the call with the $50 strike price if at the expiration stock
price are: $30, $50, $55, and $65 . What is the breakeven stock
price at expiration for investor to make profits?
f. Estimate profit and loss if the...

1. A put option has strike price $75 and 3 months to expiration.
The underlying stock price is currently $71. The option premium is
$10. "What is the time value of the put option?
Would this just be 0? Or: 71-75=-4 then 10-(-4)= 14?
2. The spot price of the market index is $900. After 3 months,
the market index is priced at $920. An investor had a long call
option on the index at a strike price of $930...

The following prices are available for call and put options on a
stock priced at $50. The risk-free rate is 6 percent and the
volatility is 0.35. The March options have 90 days remaining and
the June options have 180 days remaining. The Black-Scholes model
was used to obtain the prices.
Calls
Puts
Strike
March
June
March
June
45
6.84
8.41
1.18
2.09
50
3.82
5.58
3.08
4.13
55
1.89
3.54
6.08
6.93
. Use the June/March 50 call spread....

2-Suppose the underlying stock is priced at $23.5, you perform
the following 4 options trades: Buy a call option with strike price
of 20 at $2.5 Sell a call option with strike price of 22.5 at $1.75
Sell a call option with strike price of 25 at $1.25 Buy a call
option with strike price of 27.5 at $1 Draw the net payoff diagram
of the strategy and explain in what direction of the market this
strategy will be profitable?

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 56 minutes ago

asked 58 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago