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.

Answer #1

Circumstances under which option of the holder will make a gain, when the call option in the March will be exercised when the overall underlying stock value has exceeded (strike price + value of call option)= (50+2.5)=52.50.

When the call option will be exceeding 52.50, it will mean that the additional increment will be given for the call holder at the time of the maturity.

Option will only be exercised when the overall price of security has crossed the strike price and the premium paid, so it will cross 52.5 in order to get exercised, for a gain. One can even exercise it after strike price has been breached and it would be leading to being exercised at a loss if the premium payment has not been realised.

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***...

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!

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.

An investor sells a European call on a share for $4. The stock
price is $47 and the strike price is $50. Under what circumstances
does the investor make a profit? Under what circumstances will the
option be exercised? Explain how investors profit, according to the
variation of the stock price at the maturity of the option. (You
can explain by writing a simple formula of the profit, where X is
the stock price at maturity.

An investor buys a put option on a share for $4.The stock price
is $45 and the strike price if $40.Explain under what circumstances
the investor makes a profit and under what circumstances will the
option be exercised. Sketch a diagram showing the variation of the
investor's profit with the stock price at the maturity of the
option. (Please explain the answer in detail, thank you)

Suppose that a 6-month European call A option on a stock with a
strike price of $75 costs $5 and is held until maturity, and
6-month European call B option on a stock with a strike price of
$80 costs $3 and is held until maturity. The underlying stock price
is $73 with a volatility of 15%. Risk-free interest rates (all
maturities) are 10% per annum with continuous compounding.
Use put-call parity to explain how would you construct a
European...

An investor buys a European call on a share for $3. The stock
price is $40 and the strike price is $42.
a. Under what circumstances does the investor make a profit?
b. Under what circumstances will the option be exercised?
c. What is the potential loss for the investor?
d. Identify the variation of the investor's loss with the stock
price at the maturity of the option?

1. A trader buys a call option with a strike price of €45 and a
put option with a strike price of €40. Both options have the same
maturity. The call costs €3 and the put costs €4. Draw a diagram
showing the variation of the trader’s profit with the asset price.
Explain the purpose of this strategy

A trader is purchasing three European call options with a strike
price of $45 and two put options on the same stock with a strike
price of $50. Both options have the same maturity date. The price
of the call option is $5, while the price of the put option is $4.
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...

Assume that you have shorted a call option on Intuit stock with
a strike price of $31; when you originally sold (wrote) the
option, you received $5. The option will expire in exactly three
months' time.
a. If the stock is trading at $ 36 in three months, what will
your payoff be? What will your profit be?
b. If the stock is trading at $ 25 in three months, what will
your payoff be? What will your profit be?...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 minute ago

asked 3 minutes ago

asked 4 minutes ago

asked 4 minutes ago

asked 5 minutes ago

asked 5 minutes ago

asked 5 minutes ago

asked 5 minutes ago

asked 6 minutes ago

asked 6 minutes ago

asked 6 minutes ago

asked 11 minutes ago