Question

1. You buy a put option with strike price of $25. Currently, the market value of the underlying asset is $30. The put option premium is $3.25. Assume that the contract is for 150 units of the underlying asset. Assume the interest rate is 0%. a. What is the intrinsic value of the put option? b. What is the time value of the put option? c. What is your net cash flow if the market value of the options’ underlying asset is $23 on the expiration date? d. What is your net cash flow if the market value of the options’ underlying asset is $27 on the expiration date? e. Draw a diagram depicting the net payoff (profit diagram) of your position at expiration as a function of the market value of the underlying asset. f. A call option with strike price of $24 on the same underlying asset has a premium of $4.15. Suppose that a trader sells one call option and two of the $24 strike put options. What are the breakeven stock prices above and below which the trader makes a profit? In other words, under what circumstances does the trader make a profit?

Answer #1

Ans a) Intrinsic Value of PUT Option = call strike price -underlying's current price

= 30-25

= 5

Ans b) Time Value of PUT Option = Put premium-Intrinsic Value

= 5-3.25

=1.75

Ans c) Cashflow if price = $23

= 25-23

**=$ 2 Profit**

Ans d) If Price is 27 then , = 25 - 27

=-2

**= $ 2 Loss**

Ans e)

Here in this payoff Diagram the Scenrio on the base of Market position and Profit Structure is their.

Ans f) If Trade Writer took position where ,

SELL CE $24 at 4.15 - 1 qty

SELL PE $ 24 - 2 qty

- If stock price would be 24 or greater than 24 the Trader would be making Profit. As the Position is of Bullish Neutral strategy.

You buy a put option with strike price of $40 and simultaneously
buy two call options with the same strike price, $40. Currently,
the market value of the underlying asset is $39. The put option
premium is $2.50 and a call option sells for $3.25. Assume that the
contract is for 1 unit of the underlying asset. Assume the interest
rate is 0%. Draw a diagram depicting the net payoff (profit
diagram) of your position at expiration as a function...

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

Intel stock price is $21 and Intel stock put
option with a strike price X=$25 and August expiration has
a premium P=$5.5 as of right now. You just bought the put
option at P=$5.5 and will hold it till the expiration date.
1) For the option premium, how much are the intrinsic value and
time value? (4 points)
2) What would be your profit / loss if the stock price of Intel
is $30 on the expiration date? (3 points)...

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.

A call option with a strike price of
$1.30/€ and a premium of $0.03/€ is
executed as the market price is $1.39/€. The buyer of the option
has purchased ten contracts (one contract is for €12,500). The
total profit amounts to:
Question options:
€7,500
$7,500
€11,250
$11,250
Question 16 (1 point)
Saved
A trader holds a European put option with a strike price
off $1.30/€ and a premium of $0.05/€. At the expiration date the
market rate is $1.40/€. What...

The stock price of BAC is currently $150 and a put option with
strike price of $150 is $10. A trader goes long 300 shares of BAC
stock and long 3 contracts of the put options with strike price of
$150.
a. What is the maximum potential loss for the trader?(sample
answer: $105.75)
b. When the stock price is $161 on the expiration, what is the
trader’s net profit?(sample answer: $105.75)

An investor purchases one call option (strike price $43 and
premium $1.20) and purchases 3 put options (strike price $43 and
premium $1.65) on the same underlying stock. What is the investor's
total profit or loss (enter profit as positive or a loss as a
negative value) per share if the stock price at expiration is
$21.15?

-You wrote a put option on AAPL stock with a strike price of
$140 and a put premium of $17.35. The stock price at expiration is
$115.00. What is your profit or loss?
- You bought a put option on the SPY ETF with a strike price of
$195 and a put premium of $0.95. The stock price at expiration is
$190.50. What is your profit or loss?
-You took a “bear spread” position on the VXX EFT by buying...

1. A put option has strike price $75 and 3 months to expiration.
The underlying stock price is currently $71. The option premium is
$10. "What is the time value of the put option?
Would this just be 0? Or: 71-75=-4 then 10-(-4)= 14?
2. The spot price of the market index is $900. After 3 months,
the market index is priced at $920. An investor had a long call
option on the index at a strike price of $930...

The strike price for a European call and put option is $56 and
the expiration date for the call and the put is in 9 months. Assume
the call sells for $6, while the put sells for $7. The price of the
stock underlying the call and the put is $55 and the risk free rate
is 3% per annum based on continuous compounding. Identify any
arbitrage opportunity and explain what the trader should do to
capitalize on that opportunity....

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 minute ago

asked 3 minutes ago

asked 3 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 10 minutes ago

asked 10 minutes ago

asked 10 minutes ago

asked 10 minutes ago

asked 14 minutes ago

asked 16 minutes ago

asked 17 minutes ago