Question

Assume you create a Butterfly with strike prices of 200, 210 and 220. The current stock price is 211. The price of the options are as follows:

Call X=200: 22;

Call X=210: 16;

Call X=220: 12.

The initial investment being 2 (-1*22+2*16-1*12=2).

**1. The breakeven prices for this strategy
are:**

202 and 222

209 and 213

202 and 218

198 and 218

198 and 222

**2. If the price at expiration (S1) is 214, then the %
gain/loss from this strategy is:**

gain of 800%

gain of 100%

gain of 400%

gain of 300%

gain of 200%

**3. The % moves to max loss prices from the price today
are:**

-4.27% and +4.27%

-5.21% and +4.27%

-4.76% and +3.81%

-3.81% and +5.71%

-4.27% and +3.32%

Answer #1

1.

Upper Breakeven Point = Strike Price of Higher Strike Long Call -
Net Premium Paid=220-2=218

Lower Breakeven Point = Strike Price of Lower Strike Long Call + Net Premium Paid=200+2=202

2.

=(MAX(214-200,0)-2*MAX(214-210,0)+MAX(214-220,0))/2-1

=200.0000%

3.

Max Loss Occurs When

a) Price of Underlying <= Strike Price of Lower Strike Long
Call

% move=200/211-1=-5.2133%

OR

b) Price of Underlying >= Strike Price of Higher Strike Long Call

% move=220/211-1=4.2654%

-5.21% and +4.27%

Assume you create a straddle for stock XYZ with a strike price
of 120. The cost of the put (X=120) is 5 and the cost of the call
(X=120) is 7. The current stock price is 120.40.
1. What are the breakeven prices for this
strategy:
108.00 and 132.00
123.00 and 125.00
123.60 and 125.60
115.00 and 127.00
115.40 and 127.40
2. If the stock price at expiration (S1) is
110. The $ gain/loss from this strategy is:
gain of...

Suppose you are given the following prices for the options on
ABC stock:
Strike (in
$)
call
put
15.0
1.6
2.0
17.5
1.2
2.5
20.0
0.9
3.2
Suppose you take the following position: long one call with
strike 15.0, short two calls with strike 17.5, and long one call
with strike 20.0. Please draw the payoff at maturity.
What would be the total gain (loss) on the above position if
the stock price at maturity turned out to be...

Suppose you are given the following prices for the options on
ABC stock:
Strike (in
$)
call
put
15.0
1.6
2.0
17.5
1.2
2.5
20.0
0.9
3.2
Suppose you take the following position: long one call with
strike 15.0, short two calls with strike 17.5, and long one call
with strike 20.0. Please draw the payoff at maturity.
What would be the total gain (loss) on the above position if
the stock price at maturity turned out to be...

George Soros and Warren Buffet both believe the stock market is
going down (i.e. stock prices will fall). Soros decides to use an
option strategy and Buffet decides to use a forwards strategy.
Currently, the stock market is priced at $200. A call option has a
strike of $205 and costs $2. A put option has a strike of $195 and
costs $3. The forward price is $201. Each investor uses the
respective derivative strategy mentioned above. What is the...

Suppose you think Apple stock is going to appreciate
substantially in value in the next year. Say the stock’s current
price, S0, is $200, and a call option expiring in one year has an
exercise price, X, of $200 and is selling at a price, C, of $10.
With $20,000 to invest, you are considering three alternatives.
a. Invest all $20,000 in the stock, buying 100 shares.
b. Invest all $20,000 in 2,000 options (20 contracts).
c. Buy 100 options...

2. Suppose you short sell 100 shares of stock X, which now sells
for $200/share. What is your maximum possible loss? What happens to
the maximum loss if you simultaneously place a "stop-buy" order at
$210?
3. Suppose that you open a brokerage account and purchase 300
shares of stock Y at $40/share. You borrow $4,000 from your broker
to help you pay for the purchase. The interest rate on your loan is
8%. What is the margin in your...

Month
time
Sales
Jan
1
200
Feb
2
203
March
3
210
Mar
4
218
April
5
230
May
6
245
Jun
7
346
Jul
8
376
Aug
9
389
Sep
10
231
Oct
11
200
Nov
12
189
Dec
13
155
Jan
14
178
Feb
15
193
Mar
16
192
Apr
17
201
May
18
212
Jun
19
367
Jul
20
391
Aug
21
401
Sep
22
204
Oct
23
201
Nov
24
183
Dec
25
145
Jan
26...

Use the following information is answering questions 1 - 11.
Assume the demand in a market is given by Q = 100 - 2P and that MC
= AC = 10. Assume there are two sellers whose strategy is to choose
a quantity and that seller 1 chooses first and seller 2 chooses
second. Assume this game is repeated an infinite number of
times.
1. The Stackelberg equilibrium in this market is for firm 1 to
produce ____ and firm...

A loan made on March 14 is due September 13 of the following
year. Find the exact time for the loan in a non-leap year and a
leap year.
days.
The exact time in a non-leap year is ? days
The exact time in a leap year is ? days.
Data Table
Sequential Numbers for Dates of the Year
Day of Month
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
1
1
32
60
91
121...

The Red Lobster Restaurant chain conducts regular surveys of its
customers to monitor the performance of individual restaurants. One
of the questions asks customers to rate the overall quality of
their last visit. the listed responses are Poor 1, Fair 2, Good 3,
Very Good 4, and Excellent 5. The survey also asks respondents
whether their children accompanied them (1=yes) and (2=no).
Graphically depict these data and describe your findings.
Customer
Rate
Children
1
4
1
2
3
2
3...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 37 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago

asked 4 hours ago