Question

- A trader sells a European call option on a share for 4 SEK. The stock price is 47 SEK and the strike price is 50 SEK. Under what circumstances does the trader make a profit? Under what circumstances will the option be exercised? Draw a diagram showing the variation of the trader’s profit with the stock price at the maturity of the option.

Please carefully label: Breakeven point, profit, loss and don't forget the diagram.. thanks in advance!

Answer #1

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An investor sells a European call on a share for $4. The stock
price is $47 and the strike price is $50. Under what circumstances
does the investor make a profit? Under what circumstances will the
option be exercised? Explain how investors profit, according to the
variation of the stock price at the maturity of the option. (You
can explain by writing a simple formula of the profit, where X is
the stock price at maturity.

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

.
Suppose that a March call option on a stock with a strike price of
$ 50 costs $ 2.50 and is held until March. Under what circumstances
will the holder of the option make a gain? Under what circumstances
will the option be exercised? Draw a diagram showing how the profit
on a long position in the option depends on the stock price at the
maturity of the option.

An investor buys a European call on a share for $3. The stock
price is $40 and the strike price is $42.
a. Under what circumstances does the investor make a profit?
b. Under what circumstances will the option be exercised?
c. What is the potential loss for the investor?
d. Identify the variation of the investor's loss with the stock
price at the maturity of the option?

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)

can someone explain?
The stock price of Lotus is currently $220 and the call option
with strike price of $220 is $10. A trader purchases 100 shares of
Lotus stock and short 1 contract of call options with strike price
of $220. As a financial analyst at Citibank, you want to answers
the following two questions:
a. What is the
maximum potential loss for the trader?
b. When the
stock price is $240 and the call is exercised, what is the trader’s...

A trader is purchasing three European call options with a strike
price of $45 and two put options on the same stock with a strike
price of $50. Both options have the same maturity date. The price
of the call option is $5, while the price of the put option is $4.
Create a table and a diagram illustrating the profit at termination
from these positions for various levels in the price of the
underlying. On one chart draw a...

The price of a stock is $75. A trader sells 6 put option
contracts (each contract of 100) on the stock with a strike price
of $78 when the option price is $5. The options are exercised when
the stock price is $74. What is the trader’s net profit or
loss?
Solve in following 4 steps.
a) Option profit ?
b) Trader’s gain per option ?
c) Total options sold ?
d) Trader’s total gain ?

Q4. A trader longs a European call and shorts a European put
option. The options have the same underlying asset, strike price
and maturity. Please depict the trader’s position. Under what
conditions is the value of position equal to zero? (Hint: compare
the payoff pattern of the option position with that of a forward
contract.)

The price of a stock (S0) is $75. A trader sells 6 (N) put
option contracts (each contract of 100) on the stock with a strike
price (K) of $78 when the option price (c) is $5. The options are
exercised when the stock price (S1) is $74. What is the trader’s
net profit or loss?
Solve in following 4 steps.
a) Option profit ?
b) Trader’s gain per option ?
c) Total options sold ?
d) Trader’s total gain...

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