Question

**An investor buys for $3 a three-month put with a strike
price of $38 and sells for $1 a three-month put with a strike price
of $34. What are the profits from this bear spread
strategy?**

Answer #1

**Answer :** Under Bear spread strategy , Put
option having lower strike Pice is sold and Buy Put Option having
higher strike Price.

To calculate the profits from bear strategy we first nee to calculate loss

Buy Put option at strike price of $ 38

Outflow of Premium = $ 3

Sell Put option at strike price of $ 34

Inflow of Premium = $ 1

Initial Outflow = Maximum Loss = $3 -$ 1

= $ 2

Maximum Gain = Difference in Strike Price - Maximum Loss

= (38 - 34) - 2

=4 - 2

**=$2**

An investor writes a put option with exercise (strike) price of
$80 and buys a put with exercise price of $65. The puts sell for $8
and $3 respectively. If the options are on the same stock with the
same expiration date,
i. Draw the payoff and profit/loss diagrams for the above
strategy at expiration date of options
ii. Calculate the breakeven point for this strategy and discuss
whether the investor is bullish or bearish on the underlying
stock.

An investor wants to construct a bear spread using two
put options with the same expiration T. One put has the strike
price of $20 and currently sells for $2. The other put has the
strike price of $30 and currently sells for $7. Find the range of
stock price on T that results in a positive profit for the
investor.

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 one-month European call option on Bitcoin is with the strike
price of $8,505, $8,705, and $8,905 are trading at $600, $500, and
$415, respectively. An investor implements a butterfly spread
(i.e., she buys one call with the strike price of $8,505, sells two
calls with the strike price of $8,705, and buys one call with the
strike price of $8,905. If at the maturity, the Bitcoin price is
$8,605, what is the investor's profit?

Sugar Land stock is selling for $47 and has the following
six-month options outstanding.
Strike Price
Option Market Price
Call Option
$45
$4
Call option
$50
$1
e. Estimate profit and loss if the investor buys the stock and
sells the call with the $50 strike price if at the expiration stock
price are: $30, $50, $55, and $65 . What is the breakeven stock
price at expiration for investor to make profits?
f. Estimate profit and loss if the...

Verizon buys a 1.3 $/pounds strike put to hedge a 100,000 pounds
AR due in 1 month and sells 200,000 pounds in a 1.3 $/pounds strike
call to offset the cost of the put. Suppose the exchange rate turns
out to be 1.2 $/pounds at the expiration. What is the dollar value
of the AR hedged with the options strategy. Write all calculation
required

You buy a three-month put option on £1,000,000 at a strike price
of $1.32/£ and a premium of $0.05/£. What is your total profit or
loss if the spot exchange rate is $1.40/£ in three months time?
Question 38 options:
$80,000 profit
$30,000 loss
$50,000 loss
$30,000 profit

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)

Three put options on a stock have the same expiration date and
strike prices of $50, $60, and $70. The market prices are $3, $5,
and $9, respectively. Lou buys the $50 put, buys the $70 put and
sells two of the $60 puts. Lou's strategy potentially makes money
(i.e. positive profit) in which of the following price ranges?
$40 to $50
$55 to $65
$85 to $95
$70 to $80

Three put options on a stock have the same expiration date and
strike prices of $50, $60, and $70. The market prices are $3, $5,
and $9, respectively. Harry buys the $50 put, buys the $70 put and
sells two of the $60 puts. Harry's strategy potentially makes money
(i.e. positive profit) in which of the following price ranges?
$70 to $80
$85 to $95
$40 to $50
$55 to $65

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 14 minutes ago

asked 15 minutes ago

asked 20 minutes ago

asked 58 minutes ago

asked 59 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago