Question

Suppose the price of an asset is $50 per unit. A Call option on the asset with a strike price of $55 is trading in the market at a premium of $2, a Put option on the asset with a strike price of $45 is trading in the market at a premium of $8, and a forward contract on the asset is trading at a price of $52. All derivatives contracts are on 1 unit of the asset and all expire the same day.

If you buy 1 unit of the asset, buy 1 call option contract, sell 1 put option contract and enter into a long position in 1 forward contract, what is the P/L on each of these four positions in the future when the derivatives contracts all expire and the price of the asset is $54 per unit?

Answer #1

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...

You buy a put option on one unit of the underlying asset. The
option has a premium of $3.50 and a strike price of $15. As the
option is about to expire, the underlying asset is worth $21.70.
What will your net payoff be?

The premium of a call option with a strike price of $50 is equal
to $5.5 and the premium of a call option with a strike price of $55
is equal to $4. The premium of a put option with a strike price of
$50 is equal to $3.5. All these options have a time to maturity of
6 months. The risk-free rate of interest is 9%. In the absence of
arbitrage opportunities, what should be the premium of a...

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...

A call option with a strike price of
$1.30/€ and a premium of $0.03/€ is
executed as the market price is $1.39/€. The buyer of the option
has purchased ten contracts (one contract is for €12,500). The
total profit amounts to:
Question options:
€7,500
$7,500
€11,250
$11,250
Question 16 (1 point)
Saved
A trader holds a European put option with a strike price
off $1.30/€ and a premium of $0.05/€. At the expiration date the
market rate is $1.40/€. What...

The premium of a call option with a strike price of $45 is equal
to $4.5 and the premium of a call
option with a strike price of $55 is equal to $2. The premium of a
put option with a strike price of $45
is equal to $2.5. All these options have a time to maturity of 3
months. The risk-free rate of interest is
6%. In the absence of arbitrage opportunities, what should be the
premium of a...

Suppose that you have taken a short position on a call option.
The strike price if $55, and the option premium / price is $5. When
the option expires, the value of the underlying asset is $54. What
is your pay-off and profit / loss?
*** You must show your work to get credit (you can use
both sides of the page to show your work)

The premium of a call option with a strike price of $50 is equal
to $6 and the premium of a call
option with a strike price of $60 is equal to $3. The premium of a
put option with a strike price of $50
is equal to $4. All these options have a time to maturity of 6
months. The risk-free rate of interest is
7%. In the absence of arbitrage opportunities, what should be the
premium of a...

conceptually, a call option is a small payment (called option
premium) to secure a certain price for an asset at a certain date.
When that date comes, you can either purchase the asset for that
certain price or just walk away. There is no obligation. All
options contracts are specified by the expiration date, premium
paid, strike price, and the direction (call or put). A call option
is a bet on price increase and a put option is a bet...

Now is July 10. The current spot price of an underlying asset is
$12. You buy five September European put option contracts with the
strike price of $13. The option premium per contract is $1.2. The
contract size per contract is 10. What is the moneyness of the put
options when you purchased the options?

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