Question

1. Why would an investor buy a put option in a stock that they already own?...

1. Why would an investor buy a put option in a stock that they already own?

2. How do you work out the intrinsic value of a call option?

3. Briefly explain what is the Efficient Market Hypothesis and why is it important for investors

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Proper solution is provided.

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
Define a call and put option. Using the following examples explain what the investor is receiving....
Define a call and put option. Using the following examples explain what the investor is receiving. Buy an XYZ July 50 call @ $2.10. Buy an XYZ October 85 put @ $1.75. Sell an XYZ April 40 put @ $3.50. Sell an August 55 call $1.90. Could you also explain how the investor would make money off of buying a call/put and or selling ! Thanks.
Discuss why the owner of an oil well might wish to buy put options for oil....
Discuss why the owner of an oil well might wish to buy put options for oil. As part of your discussion, briefly explain what is meant by put-call parity. Also explain how the Black-Scholes formula can be combined with put-call parity to estimate the market value of a European put option for oil. Note that you are not required to write down the Black-Scholes formula as part of the answer to this question.
1. You buy a put option with strike price of $25. Currently, the market value of...
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...
Suppose you buy a stock, buy a put option with a strike price of $80 on...
Suppose you buy a stock, buy a put option with a strike price of $80 on the stock, and write a call option on the stock with a strike price of $100. What is the total payoff (not profit) if the stock price at expiration is $125?
The price of a stock is $40. The price of a one-year European put option on...
The price of a stock is $40. The price of a one-year European put option on the stock with a strike price of $30 is quoted as $7 and the price of a one-year European call option on the stock with a strike price of $50 is quoted as $5. Suppose that an investor buys 100 shares, shorts 100 call options, and buys 100 put options. Draw a diagram illustrating how the investor’s profit or loss varies with the stock...
1) Derivative markets differ from stock and bond markets in that: A. derivative products are a...
1) Derivative markets differ from stock and bond markets in that: A. derivative products are a zero sum game B. derivatives are not issued by the company that the contracts relate to C. both A and B D. none of the above 2) An investor buys a Call option on a stock for $5. The strike price is $40 per share. On the expiry date the market price of the stock is $42 per share. A. The investor has made...
Below is information on exchange traded options: stock trades at $6.40 Call and Put options Option...
Below is information on exchange traded options: stock trades at $6.40 Call and Put options Option Expiry Last Price Vol. Strike Call Jun 2020 2.90 10 4.00 Call Sep 2020 0.45 40 7.00 Put Sep 2020 2.35 15 8.00 Put Dec 2020 6.85 - 11.00 1) Which options (if any) are out of the money? Which options (if any) are in the money? No calculations required. No explanations required. 2) Based on information provided in question 1, calculate the time...
1. A put option has strike price $75 and 3 months to expiration. The underlying stock...
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...
An investor buys a put option on a share for $4.The stock price is $45 and...
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)
2. Suppose you purchase a put option to sell IBM common stock at $100 per share...
2. Suppose you purchase a put option to sell IBM common stock at $100 per share in September. The current price of IBM is $85 and the option premium is $10. a. What is the intrinsic value of this option? As the expiration date on the option approaches, what will happen to the size of the option premium? b. What would be in intrinsic value if this was a call option?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT