Question

XYZ Stock currently trades for $45 per share. You find the following options matrix (prices of calls and puts) for a June 1st expiration date (which applies for all)

40 strike call option: $9 40 strike put option: $2

45 strike call option: $4 45 strike put option: $4

50 strike call option: $2 50 strike put option: $9

55 strike call option: $1 55 strike put option: $15

You believe that XYZ will be extremely volatile in the next month and so you purchase one ATM straddle. In order to make money (have a positive ROI) on this position, the value of a share of XYZ stock at the June 1st expiration must be either below ___

Answer #1

Straddle is an option strategy in which trader buys a call option and put option of the same expiry of the same stock.

The trader is buying the at the money straddle which means he will buy call option and put options of 45 strike.

To gain from the straddle, the rise of the fall in the stock must be higher than the premium paid on the call and put.

So the question is asking about gaining on the put option on the straddle so it must and below the (strike price-premium paid)

=[45-4-4]

= $ 37.

So the value of share must be either below 37 or above 53(45+4+4).

3. You purchased 100 shares of JNJ stock at $50 per share. The
stock is currently selling at $45. You would like to lock up your
total loss to no more than $700. Which of the following action will
help you?
OPTIONS;
A. place a stop-buy order at $57
B. place a stop-loss order at $43
C. place a limit buy order at $53
D. place a limit sell order at $47
E. none of the above
4.
Which of...

A stock trades for $45 per share. A call option on that stock
has a strike price of $54 and an expiration date six months in the
future. The volatility of the stock's returns is
42%, and the risk-free rate is 44%. What is the Black and
Scholes value of this option?

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...

b. A stock that is currently selling
for $47 has the following six-month options
outstanding:
Strike Price
Market Price
Call Option
$45
$4
Call Option
$50
$1
Which option(s) is (are) in the money?
Which option(s) is (are) at the money?
Which option(s) is (are) out of the money?
What is the profit (loss) at expiration given different prices
of the stock ($30, $35, $40, $40, $45, $50, $55, and $60) if the
investor buys the call with $50 strike...

Both a call and a put currently are traded on stock Xue; both
have strike prices of $50 and maturities of 6 months.
What will be the profit/loss to an investor who buys one
call contract at $3 a share? How about for the person who
buys one put contract for $6.50 a share? [Hint:
profit= value of the option at expiration- initial cost]
Scenario
Call option: Profit/Loss
Put option: Profit/Loss
$40
$45
$50
$55
$60

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....

The current price of Stock A is $305/share. You believe that the
price will change in the near future, but your are not sure in
which direction. To make a profit from the price change, you
purchase ONE call option contract (each contract has 100 calls) and
TWO put option contracts (each contract has 100 puts) at the same
time. The call option and the put option have the same expiration
date. The strike price of the call option is...

QUESTION 14
XYZ stock, currently trading at $45, has the following quotes
from its option chain expiring in 6-months:: Call Strike = 48, Last
Price=2.40, Bid=2.05, Ask=2.75 Put Strike = 43, Last Price= 1.55,
Bid=1.08, Ask=1.70 What is the maximum gain (G) and loss (L) per
share for a collar contract at these strike prices if you buy XYZ
stock at the current price?
G=6.75, L=unlimited
G=4.67, L=0.33
G=3.35, L=1.65
G=4.05, L=0.95
QUESTION 15
You want to sell a naked...

Both a call and a put currently are traded on stock XYZ; both
have strike prices of $50 and maturities of six months.
A) What will be the profit to an investor who buys the call for
$4 in the following scenerios for stock prices in six months? ($40)
($45) ($50) ($55) ($60)
B) What will be the profit in each scenario to an investor who
buys the put for $6?

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