Question

Stock in Cheezy-Poofs Manufacturing is currently priced at $50 per share. A call option with a...

Stock in Cheezy-Poofs Manufacturing is currently priced at $50 per share. A call option with a $50 strike and 90 days to maturity is quoted at $1.95. Compare the percentage gains and losses from a $97,500 investment in the stock versus the option in 90 days for stock prices of $40, $50, and $60.

Homework Answers

Answer #1

ANSWER IN THE IMAGE. FEEL FREE TO ASK ANY DOUBTS. 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
You are evaluating a European call option on a no-dividend paying stock that is currently priced...
You are evaluating a European call option on a no-dividend paying stock that is currently priced $42.05. The strike price for the option is $45, the risk-free rate is3% per year, the volatility is 18% per year, and the time to maturity is eleven months. Use the Black-Scholes model to determine the price of the option.
XYZ Stock currently trades for $45 per share. You find the following options matrix (prices of...
XYZ Stock currently trades for $45 per share. You find the following options matrix (prices of calls and puts) for a June 1st expiration date (which applies for all) 40 strike call option: $9                                40 strike put option: $2 45 strike call option: $4                                45 strike put option: $4 50 strike call option: $2                                50 strike put option: $9 55 strike call option: $1                                55 strike put option: $15 You believe that XYZ will be extremely volatile in the next...
Company A’s stock is currently selling at $200 per share. A one-year American call option with...
Company A’s stock is currently selling at $200 per share. A one-year American call option with strike price $50 trading on the Acme options exchange sells for $75. (1) How would you take this opportunity to make a profit? (2) Suppose the option is a European call option instead, what is your strategy to make a profit?
The following prices are available for call and put options on a stock priced at $50....
The following prices are available for call and put options on a stock priced at $50. The risk-free rate is 6 percent and the volatility is 0.35. The March options have 90 days remaining and the June options have 180 days remaining. The Black-Scholes model was used to obtain the prices. Calls Puts Strike March June March June 45 6.84 8.41 1.18 2.09 50 3.82 5.58 3.08 4.13 55 1.89 3.54 6.08 6.93 . Use the June/March 50 call spread....
Xylem’s stock is currently selling at $200 per share. A one-year American call option with strike...
Xylem’s stock is currently selling at $200 per share. A one-year American call option with strike price $50 trading on the Acme options exchange sells for $75. (1) (2 pts.) How would you take this opportunity to make a profit? (2) (2 pts.) Suppose the option is a European call option instead, what is your strategy to make a profit?
A six month call option on Harkonnen BioSands stock with a strike of 50 currently sells...
A six month call option on Harkonnen BioSands stock with a strike of 50 currently sells for 3. A put option with the same strike and expiration date sells for 2. The interest rate is 2.5 percent. Harkonnen currently sells for 52 per share. Given all this, explain your arbitrage strategy and how much money you expect to make.
You bought a call option on July 27, 2020 at the exercise price of $65. It...
You bought a call option on July 27, 2020 at the exercise price of $65. It expires on October 26, 2020. The stock currently sells for $66., while the call option sells for $6. A stock that is currently selling for $47 has the following six-month options outstanding: Strike Price Market Price Call Option $45 $4 Call Option $50 $1 Which option(s) is (are) in the money? Which option(s) is (are) at the money? Which option(s) is (are) out of...
The price of DEF Corp. stock is $50 per share and the call option on the...
The price of DEF Corp. stock is $50 per share and the call option on the stock has a price of $10 and an exercise price of $45, with a time to maturity of one year. Assume the risk-free rate is 6%. If the volatility of the stock is 20% during the year, use the two-state model to derive the price of the option.
Both a call and a put currently are traded on stock Xue; both have strike prices...
Both a call and a put currently are traded on stock Xue; both have strike prices of $50 and maturities of 6 months. What will be the profit/loss to an investor who buys one call contract at $3 a share? How about for the person who buys one put contract for $6.50 a share? [Hint: profit= value of the option at expiration- initial cost] Scenario Call option: Profit/Loss Put option: Profit/Loss $40 $45 $50 $55 $60
A stock is currently selling for $60 per share. A call option with an exercise price...
A stock is currently selling for $60 per share. A call option with an exercise price of $65 sells for $3.71 and expires in three months. If the risk-free rate of interest is 2.9 percent per year, compounded continuously, what is the price of a put option with the same exercise price?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT