Question

Suppose you construct the following European option trades on
Microsoft stock:

purchase a call option with an exercise price of $28 and a premium
of $12 and

write a call option with an exercise price of $62 and a premium of
$6. What is your maximum dollar net profit, per share?

Answer #1

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Suppose you construct the following European option trades on
Apple stock: purchase a put option with exercise price $83 and
premium $2.79, and purchase a call option with exercise price $95
and premium $4.19. What is your maximum dollar net loss, per
share?

Suppose you construct the following European option trades on
Apple stock: write a put option with exercise price $33 and premium
$1.57, and write a call option with exercise price $33 and premium
$4.29. What is your maximum dollar net profit, per share?

You want to price a European call option on stock X, which
currently trades at $40 per share (this stock does not currently
pay dividends). Suppose there are two possible outcomes for share
prices of stock X next period: It can go up by 15%, or it can drop
by 10%.
The option expires in one period, and has a strike price of $41.
The risk-free rate over the next period is 5% (you can lend and
borrow at the...

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...

You buy one contract for a 6-month European call option in June
2010 for $1.25 with exercise price of $18.00. On September 1, 2010,
the stock reaches its 52-week low at $12.65 per share. On December
16, 2010, the stock is selling at $16.75. What is your profit or
loss on the purchase?

1. Tucker Inc. common stock currently trades for $90/share.
6-month European put options on the stock have an exercise price
and premium of $93 and $4, respectively. The annual risk free rate
is 2%. What should be the value of a 6-month European call option
on the stock with an exercise price of $93 according to put-call
parity? Round intermediate steps to four decimals and your final
answer to two decimals.
a. 7.90
b. 0.065
c. 1.93
d. 2.84
e....

Suppose a European call option to buy a share for $22.50 costs
$1.75. The stock currently trades for $20.00. If the option is held
to maturity under what conditions does the holder of the option,
make a profit? Note: ignore time value of money. How would the
answer change if this was an American call option?
Please show work

Suppose you purchase ten call contracts on Kaho stock. The
strike price is $75, and the premium is $4.10. If, at expiration,
the stock is selling for $80 per share, what are your call options
worth? What is your net profit? Value of call options Net
profit

5. A put option in finance allows you to sell a share of stock
in the future at a given price. There are different types of put
options. A European put option allows you to sell a share of stock
at a given price (called the exercise price) at a particular point
in time after the purchase of the option. For example, suppose you
purchase an eight-month European put option for a share of stock
with an exercise price of...

Stock currently trades for $30.63, strike price is $30.96, the 6
month European call trades at $2, risk free rate is 6% per annum,
calculate the price for the 6 month European put using put-call
parity. The stock does not pay dividends. Keep your answer to two
decimal places.

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