Question

Consider the following: BBB is 43 in May There are July options at 37.5, 40, 45,...

Consider the following:

BBB is 43 in May There are July options at 37.5, 40, 45, and 50

21. You think it could go to 40 by July. Give three specific option strategies for profiting on this move with limited risk.

22. You think it could go to 47 by July. Give three specific option strategies for profiting on this move with limited risk.

23. You believe that the stock will make a big move by July to either 55 or 35. Give a specific option strategy for profiting on this move.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

21) This is a bearish trend indicator. The three strategies can be:

Long put- One has to pay premium but loss is limited till premium.
Short call at 45- One would gain by getting premium and does not lose if prices go below. Risk is if price rises

Bear put spread- Write an equal number of out of the money puts at a lower price

22) Long call- Premium is paid and loss is limited to premium
Short put- Premium received. Loss when there is a bearish trend

Bull call spread-Write an equal number of out of the money calls at a lower price

23)One can enter a long straddle whereby there are:


Two Transactions (buy call options and buy put options)- Buy 45 call and put options

Upfront cost of options- However profit if prices move either way in a big way.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The following European options are traded on the market Option Type Strike Put $40 Put $45...
The following European options are traded on the market Option Type Strike Put $40 Put $45 Put $50 Call $45 Call $50 Assume that all options are on one share of stock and all have three months left to expiration. The stock is currently traded at $44.50. a. Investor A believes that in three months the stock price is going to decrease from the current level, but will not fall below $40. Suggest an option trading strategy that would be...
SHORT-TERM FINANCING AND OPTIONS CONTRACT Gregg, the CFO and the board of directors of Baldwin Inc....
SHORT-TERM FINANCING AND OPTIONS CONTRACT Gregg, the CFO and the board of directors of Baldwin Inc. have taken enough time to discuss capital budgeting, dividend policy, and capital structure and now want to focus their attention on short-term finance and cash planning of the company. The board is considering the ways to improve the working capital management of the company. They are also discussing various sources of short-term financing and the minimum amount of money to borrow in the short-term...
Answer the following question for any pilgrimage of your choice 1) What is name of your...
Answer the following question for any pilgrimage of your choice 1) What is name of your pilgrimage site? 2) Where is located? 3) Can you make a pilgrimage at any time or does it need to be on a certain day to coincide with a celebration/ceremony/time of year? 4) Can you visit alone or must you be with a group? 5) Do you know anyone that has been to this place? 6) If so, asked them for five things you...
Question 26 (1 point) Retrospective voting is a type of bloc voting and occurs when: Question...
Question 26 (1 point) Retrospective voting is a type of bloc voting and occurs when: Question 26 options: 1) voters give votes to candidates based on promises made. 2) the elderly voters withhold votes to candidates based on a judgment of past performance. 3) voters tell their friends not to vote for a candidate based on the candidates' past performance. 4) elderly voters do not vote but think about the past times in which they have voted. Save Question 27...
Describe and assess the different risks associated to each alternative of the decision making and select...
Describe and assess the different risks associated to each alternative of the decision making and select your risk preference or tendency to choose a risky or less risky option. (300 words minimum) The directors of fast food chain of restaurants based in Barcelona named El Mejicano were considering whether to begin the promotion for their new line of menus than originally planned. "I think we should go ahead with the price cuts," Pedro Morales said. "After all, it couldn't hurt!...
1. Explain two main reasons why we need to study public finance 2. Distinguish between the...
1. Explain two main reasons why we need to study public finance 2. Distinguish between the “organic view” and “mechanistic view” of the existence of government 3. Explain the concept of market failure and discuss five reasons why there is market failure 4. What is meant by market failure? Identify and discuss four conditions under which the market fails to optimally allocate resources. 5. What is meant by the term government failure and explain five reasons why there may be...
Read the following case carefully and then answer the questions. In the movie Face/Off, John Travolta...
Read the following case carefully and then answer the questions. In the movie Face/Off, John Travolta got a new look by exchanging faces with Nicolas Cage. Unfortunately, he got a lot of trouble along with it. John could receive a much less troublesome new look by using Botox, a treatment discovered by Vancouver’s Dr. Jean Carruthers, who came upon the cosmetic potential of Botox in 1982 while treating a woman with eye spasms. Botox is marketed by Allergan, a specialty...
Read the attached article about the acquisition of Time Warner by AT&T and answer the following...
Read the attached article about the acquisition of Time Warner by AT&T and answer the following questions; What in your estimation is the strategic aim for AT&T? What is the strategy being pursued, what evidence supports your position, and does it make sense for AT&T to pursue this strategy? Given what you know about merger and acquisition success and failure, will this be a successful acquisition? Why or why not? MUST reference and cite the relevant sections the Strategic Options...
Review the Robatelli's Pizzeria Case Study. Develop another internal controls system, but this time, in the...
Review the Robatelli's Pizzeria Case Study. Develop another internal controls system, but this time, in the purchases and fixed assets business areas. Prepare a 12- to 16-slide presentation describing the purchases and fixed assets business areas. Be sure to incorporate speaker notes as well as appropriate visuals, graphics, fonts, etc. Include any associated risk in these areas. Describe specific internal controls that include authorization of transactions, segregation of duties, adequate records and documentation, security of assets, and independent checks and...
CASE: Sharesies: NZ investment platform Everyday investment company Sharesies was launched in February 2017, after conducting...
CASE: Sharesies: NZ investment platform Everyday investment company Sharesies was launched in February 2017, after conducting research on New Zealanders’ attitudes towards investing. Prior to launching the company, the co-founders interviewed over 200 people asking them “If I gave you $50 right now, and you had to do something with it in the next 5 minutes what would you do?” Only 5 out of 200 people chose an option to save or invest the $50. More popular options were bills,...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT