Question

Suppose that a European put option has a strike price of $150 per share, costs $8 per share, and is held until maturity.

a) Under what circumstances will the seller of the option make a profit?

b) Under what circumstances will the buyer exercise the option?

c) Draw a diagram (or a table) illustrating how the profit from
a short position in the option depends on the stock price at the
maturity of the option.

Answer #1

ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

A. When stock price is above strike price then the seller of the put option will make profit.

B. Buyer will exercise the option if the trading stock price goes below strike price.

Put option:

When share prices below the strike price then put option is in the
money, otherwise, it is out of money.

For put option as strike price increases, the value of premium must increase.

C. In the image.

Suppose that a June put option on a stock with a strike price of
$60 costs $4 and is held until June. Under what circumstances will
the holder of the option make a gain? Under what circumstances will
the option be exercised? Draw a diagram showing how the profit on a
short position in the option depends on the stock price at the
maturity of the option.
**Can you please explain step by step on how to do this
question***...

.
Suppose that a March call option on a stock with a strike price of
$ 50 costs $ 2.50 and is held until March. Under what circumstances
will the holder of the option make a gain? Under what circumstances
will the option be exercised? Draw a diagram showing how the profit
on a long position in the option depends on the stock price at the
maturity of the option.

A European put option with a strike price of $50 sells for $2.
On the maturity date, the buyer can make a profit if:
A European call option with a strike price of $50 sells for $2.
On the maturity date, the buyer can make a profit if:

A trader sells a European call option on a share for 4 SEK. The
stock price is 47 SEK and the strike price is 50 SEK. Under what
circumstances does the trader make a profit? Under what
circumstances will the option be exercised? Draw a diagram showing
the variation of the trader’s profit with the stock price at the
maturity of the option.
Please carefully label: Breakeven point, profit, loss and don't
forget the diagram.. thanks in advance!

A trader is purchasing three European call options with a strike
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Create a table and a diagram illustrating the profit at termination
from these positions for various levels in the price of the
underlying. On one chart draw a...

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Use put-call parity to explain how would you construct a
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and the price of a one-year European call option on the stock with
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buys 100 shares, shorts 100 call options, and buys 100 put
options.
a) Construct a payoff and profit/loss table
b) Draw a diagram illustrating how the...

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The prices of European call and put options on a
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Draw a diagram showing the variation of an investor’s profit and
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One share and a short position in one call option
Two shares...

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