Question

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)

Answer 1