Question

~~~In Excel~~~

**Question 1.** Common stock of a company is
selling today for $53.69. Call options on the company expiring in
1-month with strike prices of $49 and $56 are selling for $4.80 and
$0.36, respectively.

How would you form a bull call spread with the two options (state what kind of options you would buy or sell at what strike price to form a call spread)? What is the cost of each spread?

If you have $890 on hand, how many spread contracts (each contract=100 options) can you buy? Remember that you cannot buy fractional contracts.

Find the total amount of profit for a single bull call spread created using the two calls described above when for stock prices are at 45, 47.5, 50, 52.5, 55, 57.5 at expiration.

What is the maximum and minimum profit for a bull call spread created using the two calls described above?

Draw profit of both the call options along with profit diagram of the bull call spread. Clearly label each axis and indicate which line is what.

~~~In Excel~~~

Answer #1

Bull Call Spread, trade set up –

- Buy $49 CE by paying $4.8 towards the premium. Since money is going out of my account this is a debit transaction
- Sell $56 CE and receive $0.36 as premium. Since I receive money, this is a credit transaction
- The net cash flow is the difference between the debit and
credit i.e 4.8 – 0.36 =
**$4.44**.

Total money in hand = $890

For buying 1 bull call spread option we will need $4.44, So for 1 spread contract we will need = 100*4.44 = $444.

So, we can buy only 2 spread contracts as the amount will be $888 (444*2)

As shown above in table:

**Max profit will be = $512**

**Max loss will be = $888**

**Payoff
Diagrams:**

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...

Suppose that call options on a stock with strike prices $300
and $345 cost $30 and $25, respectively. How can the options be
used to create a bull spread?
Call 1 – Strike $300: Position Long or short?__________
Call 2 – Strike $345: Position Long or
short?__________
I. Construct
a table that shows the profit and payoff for the spread.
II. When
is the Maximum profit? How much?
III. Draw
a diagram for the spread showing the total...

Bull call spread strategy:
The current stock price of is $78.91, you buy a call option with
the expiration of August 21, with the strike price of 72.50$ with
ask $11.30, then sell a call for 82.50$ with bid $5.40. You buy a
44 contracts of each call option, with a multiplier of 100.
Net Debit: paying $49,720(1,130*44 contracts) and receiving
$23,760(540*44)= $25,960
You liquidate the options before expiration on May 20. The stock
price on May 20 is 98$....

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. ...

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....

~~~In Excel~~~
Question 2. 1-month call and put price for
European options at strike 108 are 0.29 and 1.70, respectively.
Prevailing short-term interest rate is 2% per year.
a. Find current price of the stock using the put-call
parity.
b. Suppose another set of call and put options on the same stock
at strike price of 106.5 is selling for 0.71 and 0.23,
respectively. Is there any arbitrage opportunity at 106.5 strike
price? Answer this by finding the amount of...

A trader creates a long butterfly spread from call options with
strike prices of $160, $170, and $180 per share by trading a total
of 40 option contracts (10 contracts at $160, 20 contracts at $170
and 10 contracts at $180). Each contract is written on 100 shares
of stock. The options are worth $20, $24, and $30 per share of
stock.
What is the value of the butterfly spread at maturity as a
function of the then stock price?...

which is the best trade today if AAPL stock closes at $230/share
in 1-month? Show the profit/loss of each choice. Assume there are
no transaction costs and ignore margins in case of shorting
(selling) options.
a. Buy 100 shares of AAPL stock at $225/share and sell in one
month
b. Buy 1 call option at 235 strike expiring in 1-month for
1.50
c. Sell 1 call option at 235 strike expiring in 1-month for
1.50
d. Buy 1 put option...

The dollar to the euro is quoted at $1.1240/€ today. Call
options on the euro with an exercise price of $1.1220/€ and
expiration in three months are selling for $0.0320/€. Each option
contract is for €62,500. You start with $120,000.
1.) If you buy the euro calls, how much premium do you pay per
contract?
2.) How many call contracts can you buy?
3.) If in three months the exchange rate is $1.1280/€: would you
exercise? what would be the...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 7 minutes ago

asked 14 minutes ago

asked 46 minutes ago

asked 49 minutes ago

asked 59 minutes 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