Question

An option to buy a stock is priced at ​$200. If the stock closes above 30...

An option to buy a stock is priced at ​$200. If the stock closes above 30 on May​ 15, the option will be worth ​$1100. If it closes below​ 20, the option will be worth​ nothing, and if it closes between 20 and 30​ (inclusively), the option will be worth ​$200. A trader thinks there is a 60​% chance that the stock will close in the​ 20-30 range, a 20​% chance that it will close above​ 30, and a 20​% chance that it will fall below 20 on May 15.

Complete parts​ (a) through​ (c). ​

a) How much does she expect to​ gain? ​$ nothing ​(Round to the nearest dollar as​ needed.)

b) what is the standard deviation of her gain?

c)

Homework Answers

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
An option to buy a stock is priced at​ $200. If the stock closes above 30...
An option to buy a stock is priced at​ $200. If the stock closes above 30 on May​ 15, the option will be worth ​$500. If it closes below​ 20, the option will be worth​ nothing, and if it closes between 20 and 30​ (inclusively), the option will be worth $200. A trader thinks there is 50​% chance that the stock will close in the​ 20-30 range, a 40​% chance that it will close above​ 30, and a 10​%chance that...
An option to buy a stock is priced at ​$300. If the stock closes above 30...
An option to buy a stock is priced at ​$300. If the stock closes above 30 on May​ 15, the option will be worth ​$900. If it closes below​ 20, the option will be worth​ nothing, and if it closes between 20 and 30​ (inclusively), the option will be worth ​$300. A trader thinks there is a 60​% chance that the stock will close in the​ 20-30 range, a 30​% chance that it will close above​ 30, and a 10​%...
An option to buy a stock is priced at ​$300. If the stock closes above 30...
An option to buy a stock is priced at ​$300. If the stock closes above 30 on May​ 15, the option will be worth ​$800. If it closes below​ 20, the option will be worth​ nothing, and if it closes between 20 and 30​ (inclusively), the option will be worth ​$300. A trader thinks there is a 40​% chance that the stock will close in the​ 20-30 range, a 30​% chance that it will close above​ 30, and a 30​%...
1)A day trader buys an option on a stock that will return ​$200 profit if the...
1)A day trader buys an option on a stock that will return ​$200 profit if the stock goes up today and lose ​$600 if it goes down. If the trader thinks there is a 70​% chance that the stock will go​ up, find the standard deviation of the day​ trader's option value. The standard deviation of the day​ trader's option is____$ .(Round to two decimal places as​ needed.)
ATC Corp stock is currently priced at $23.60 a share, it is set to announce it’s...
ATC Corp stock is currently priced at $23.60 a share, it is set to announce it’s quarterly earnings at the close of the market today. Ronal thinks that the stock has a potential to double after the market closes if it beats expectations by a large margin, but there’s also a slight chance that the firm does not meet EPS expectations and the stock drops by 30%. As such Ronal is looking into options on ATC stock. The August $25...
You observe a stock is priced at $165. This stock’s option expirations are July 15, August...
You observe a stock is priced at $165. This stock’s option expirations are July 15, August 20 and October 15. The risk-free rates associated with the option expirations are 5 percent, 5.35 percent and 5.7 percent. The standard deviation is 21 percent. The stock’s option prices are stated in the table below. Calls Puts Strike Jul Aug Oct Jul Aug Oct 160 6.00 8.10 11.10 0.75 2.75 4.50 165 2.70 5.25 8.10 2.40 4.75 6.75 170 0.80 3.25 6.00 5.75...
You observe a stock is priced at $165. This stock’s option expirations are July 15, August...
You observe a stock is priced at $165. This stock’s option expirations are July 15, August 20 and October 15. The risk-free rates associated with the option expirations are 5 percent, 5.35 percent and 5.7 percent. The standard deviation is 21 percent. The stock’s option prices are stated in the table below. Calls Puts Strike Jul Aug Oct Jul Aug Oct 160 6.00 8.10 11.10 0.75 2.75 4.50 165 2.70 5.25 8.10 2.40 4.75 6.75 170 0.80 3.25 6.00 5.75...
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...
Use the option quote information shown here to answer the questions that follow. The stock is...
Use the option quote information shown here to answer the questions that follow. The stock is currently selling for $36. Calls Puts Strike   Option Expiration Price   Vol. Last    Vol. Last   Macrosoft Feb 37 94 1.13 49 2.13 Mar 37 70 1.37 31 2.54 May 37 31 1.65 20 2.96 Aug 37 12 1.86 12 3.00 a. Suppose you buy 19 contracts of the February 37 call option. How much will you pay, ignoring commissions?     Suppose you buy 19 contracts...
Questions 26-30 are based on the following stock option quote of GEM Corp, whose stock price...
Questions 26-30 are based on the following stock option quote of GEM Corp, whose stock price is $112 today. Prices Call Put Stock$ Strike$ Exp. Vol. Last $ Vol. Last $ 112 110 Aug 35 3.375 23 0.875 112 110 Sept 45 4.625 11 1.500 112 115 Aug 31 1.500 12 4.625 112 115 Sept 34 2.625 10 4.125 PRICES CALL PUT STOCK$ STRIKE $ EXP. VOL. LAST $ VOL. LAST $ 112 110 AUG 35 3.375 23 .875 112...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT