Question

Show graphically profit from buying a put option for a contract size of $62500. Assume exercise...

Show graphically profit from buying a put option for a contract size of $62500. Assume exercise price is $1.12 and option premium is $0.02. Also list cash inflows and outflows at $1.08, $1.10, $1.12, and at $1.14. What is the break-even price?

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
a. A speculator purchased a call option on Japanese Yen at a strike price of $0.70...
a. A speculator purchased a call option on Japanese Yen at a strike price of $0.70 and for a       premium of $.06 per unit. At the time the option was exercised if the Japanese Yen spot       rate was $.75 a) Find the speculator’s net profit per unit? b) If each contract is made up of 62500 units what is the net profit per contract? c) At which spot price will the speculator break even? d) What is the...
You sold fifty put contracts (1 contract = 100 shares) on ABC stock at an option...
You sold fifty put contracts (1 contract = 100 shares) on ABC stock at an option premium of $0.80. The options have an exercise price of $30. The options were exercised today when the stock price was $28.75 a share. What is your net profit or loss on this investment assuming that you closed out your positions at a stock price of $28.75? Ignore transaction costs and taxes As you were not sure if the price of ABC stock would...
Citigroup buys a call option on euros (contract size is €600,000) at a premium of $0.02...
Citigroup buys a call option on euros (contract size is €600,000) at a premium of $0.02 per euro. If the exercise price is $1.44/€ and the spot price of the euro at date of expiration is $1.48/€, A. Will this option be exercised, that is, is in-the-money or out-of-the-money? Why? (2 points) B. What is Citigroup's profit (or loss) on the call option? (3 points)
Homework Question 1) Currently a call contract with an exercise price of $10 on a share...
Homework Question 1) Currently a call contract with an exercise price of $10 on a share of List Aerospace’s common stock is selling for (that is, its premium is) $2. What would the profit or loss graph (similar to that in Figure 20.5 See PowerPoint) look like for this option? In drawing this graph, assume that the option is being evaluated on its expiration date. What are the maximum profits, maximum losses, and the break-even point? How would this graph...
A put option on British Pounds with an exercise price of $2.00 is purchased by a...
A put option on British Pounds with an exercise price of $2.00 is purchased by a speculator for a premium of $0.05. If the British Pound's spot rate is $2.10 on the expiration date, should the speculator exercise the option on this date or let the option expire? What is the net profit per unit to the speculator? What is the net profit per unit to the seller of this put option? Please show formulas
Writing Put Options. A put option on Indiana stock specifies an exercise price of $23. Today...
Writing Put Options. A put option on Indiana stock specifies an exercise price of $23. Today the stock’s price is $24. The premium on the put option is $3. Assume the option will not be exercised until maturity, if at all. Complete the following table: 5 MARKS Assumed Stock Price at the Time                             Net Profit or Loss per Share to Be Earned the Put Option Is About to Expire                           by the Writer (Seller) of the Put Option            $20 $21...
please do all the three questions and show me all the calculations step by step and...
please do all the three questions and show me all the calculations step by step and the diagram also. 1. Assume you have purchased a June put option on British pounds: the strike price is $1.30/£; the option premium is $0.10/£; and it is European style. 1) Please fill out the blanks in the table. Spot rate at maturity (in June) Exercise or not? Net profit or payoff 1.10 1.15 1.20 1.25 1.30 1.35 1.40 1.45 2) Where is the...
You buy a put option with strike price of $40 and simultaneously buy two call options...
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...
Please show work Consider a June 2020 Call option contract on BB Co. with an exercise...
Please show work Consider a June 2020 Call option contract on BB Co. with an exercise price of $55 that sells for $3.40. If on the third Friday of June (the expiration date) the price of BB is as follows, fill in the chart below as is relates to the writer of the contract. Price in June                         Value of Option Contract                 Profit/Loss for Writer $42                                         ______________                                _______________ $56                                         ______________                                _______________ $60                                         ______________                                _______________
Assume a put option on euros is written with a strike price of $1.0800/€ at a...
Assume a put option on euros is written with a strike price of $1.0800/€ at a premium of $0.0038/€ and with an expiration date three months from now. The option is for €100,000. Calculate your profit or loss should you exercise before maturity at a time when the euro is traded spot at $1.2500/€, $1.0100/€, $1.1000/€, $1.2500/€.